Ken Heebner (Trades, Portfolio)’s Capital Growth Management recently disclosed its 13F portfolio updates for the second quarter of 2021, which ended on June 30.
Boston-based Capital Growth Management specializes in swift and bold sector calls, typically establishing large short-term positions in companies that it expects will see strong growth in the near future. Heebner is the co-founder of the firm and believes that placing large bets on his convictions is the way to investing success.
Based on the above criteria, CGM’s five new buys for the quarter were Buckle Inc. (BKE, Financial), Philip Morris International Inc. (PM, Financial), Signet Jewelers Ltd (SIG, Financial), Select Medical Holdings Corp. (SEM, Financial) and Dick's Sporting Goods Inc. (DKS, Financial).
Buckle
The firm picked up 950,000 shares of Buckle (BKE, Financial), giving the stock a 4.26% weight in the equity portfolio. During the quarter, shares traded for an average price of $42.37.
Buckle is a modern fashion retailer based in Kearney, Nebraska. It sells clothing, footwear and accessories for men, women and children through physical stores and online in the U.S. The company has a commitment to ethical sourcing and manufacturing.
On Sept. 3, shares of Buckle traded around $39.91 for a market cap of $1.98 billion. According to the GuruFocus Value chart, the stock is significantly overvalued.
The company has a financial strength rating of 5 out of 10 and a profitability rating of 7 out of 10. The cash-debt ratio of 1.42 and Piotroski F-Score of 7 out of 9 show the financial situation is very healthy. The return on invested capital is consistently above the weighted average cost of capital, meaning the company is creating value for shareholders.
Philip Morris International
The firm also took a new stake in Philip Morris International (PM, Financial) worth 380,000 shares, giving the stock a 3.40% weight in the equity portfolio. Shares traded for an average price of $95.73 during the quarter.
Philip Morris is perhaps the world’s most iconic cigarette and tobacco company. Based in New York, the Swiss-domiciled company owns famous brands such as Marlboro that are sold in 180 markets globally. The company is shifting focus and aims to transition its customers to smoke-free tobacco products.
On Sept. 3, shares of Philip Morris traded around $105.67 for a market cap of $164.46 billion. According to the GF Value chart, the stock is modestly overvalued.
The company has a financial strength rating of 4 out of 10 and a profitability rating of 8 out of 10. The interest coverage ratio of 16.49% and Altman Z-Score of 4.9 show the company should be able to meet its debt repayment obligations. The company has a three-year revenue per share growth rate of -0.2% and a three-year Ebitda per share growth rate of 0.2%.
Signet Jewelers
The firm bought 450,000 shares of Signet Jewelers (SIG, Financial), giving the stock a 3.28% weight in the equity portfolio. During the quarter, shares traded for an average price of $64.43.
Signet Jewelers is the world’s largest retailer of diamond jewelry. Based in Hamilton, Bermuda, the company sells its products through more than 2,800 locations in the U.S., Canada and the UK. Its brand names include Kay Jewelers, Zales, Jared and JamesAllen.com.
On Sept. 3, shares of Signet Jewelers traded around $83.30 for a market cap of $4.42 billion. According to the GF Value chart, the stock is significantly overvalued.
The company has a financial strength rating of 5 out of 10 and a profitability rating of 6 out of 10. The Piotroski F-Score of 6 out of 9 and Altman Z-Score of 2.71 indicate a solid balance sheet. The relationship between ROIC and WACC has been highly inconsistent over the years, indicating struggles with growing in a profitable way.
Select Medical Holdings
The firm took an 855,000-share position in Select Medical Holdings (SEM, Financial), giving the stock a 3.26% weight in the equity portfolio. Shares traded for an average price of $38.41 during the quarter.
Select Medial Holdings is a health care holding company based in Mechanicsburg, Pennsylvania. Through its subsidiaries, it owns and operates long-term acute care and inpatient rehabilitation hospitals as well as occupational health and physical therapy clinics.
On Sept. 3, shares of Select Medical traded around $35.57 for a market cap of $4.79 billion. According to the GF Value chart, the stock is significantly overvalued.
The company has a financial strength rating of 4 out of 10 and a profitability rating of 9 out of 10. The Altman Z-Score of 1.74 implies the company could be in danger of bankruptcy, though the Piotroski F-Score of 8 out of 9 indicates a very healthy financial situation. The company has a three-year revenue per share growth rate of 7.6% and a three-year Ebitda per share growth rate of 15.8%.
Dick's Sporting Goods
The firm invested in 360,000 shares of Dick's Sporting Goods (DKS, Financial), giving the stock a 3.25% weight in the equity portfolio. During the quarter, shares traded for an average price of $89.36.
Based in Coraopolis, Pennsylvania, Dick’s is an American sporting goods retail company offering a wide selection of sports gear, equipment, apparel and footwear through its retail locations and online store.
On Sept. 3, shares of Dick’s traded around $144.92 for a market cap of $12.82 billion. According to the GF Value chart, the stock is significantly overvalued.
The company has a financial strength rating of 6 out of 10 and a profitability rating of 8 out of 10. The Piotroski F-Score of 7 out of 9 and interest coverage ratio of 31.46 show the company’s financial situation is very healthy. The three-year revenue per share growth rate is 9%, while the three-year Ebitda per share growth rate is 18.8%.
Portfolio overview
As of the quarter’s end, the fund held shares in 56 stocks valued at a total of $1.11 billion. The top holdings were Buckle with 4.26% of the equity portfolio, OneMain Holdings Inc. (OMF, Financial) with 3.57% and Philip Morris with 3.40%.
In terms of sector weighting, the firm was most invested in real estate, consumer cyclical and basic materials.
