Al Gore (Trades, Portfolio), co-founder of Generation Investment Management, has revealed his equity portfolio for the third quarter of 2021. His top trades include new buys into Clarivate PLC (CLVT, Financial) and Remitly Global Inc. (RELY, Financial), reductions in his Cisco Systems Inc. (CSCO, Financial) and Equifax Inc. (EFX, Financial) positions alongside an addition to his Intel Corp. (INTC, Financial) holding.
Generation is an investment management company based out of London that is dedicated to “long-term investing, integrated sustainability research, and client alignment.” The company was founded in 2004 by Gore and David Blood. The firm focuses on a long-term investment perspective, focusing on sustainability within markets with companies that strategically manage their economic, social and environmental performances; a systematic view of global challenges considering all inputs, costs and externalities; and believing that sustainable development is economically transformative.
Portfolio overview
At the end of the quarter, the guru’s portfolio contained 40 stocks with two new holdings. It was valued at $24.12 billion and has seen a turnover rate of 9%. Top holdings in the portfolio include Baxter International Inc. (BAX, Financial), Amazon.com Inc. (AMZN, Financial), Alphabet Inc. (GOOG, Financial), Cisco and Equifax.
The top sectors represented are technology (36.58%), health care (28.45%) and consumer cyclical (11.15%).
Clarivate
The guru established a new holding in Clarivate (CLVT, Financial) for the first time with the purchase of 24.98 million shares. The shares traded at an average price of $24.40 throughout the quarter. Overall, the purchase had a 2.27% impact on the equity portfolio and GuruFocus estimates the total loss of the holding at 6.56%.
Clarivate is an information service and analytics company serving the scientific research, intellectual property, and life sciences end-markets. It operates in two segments: Science and Intellectual Property. The Science segment provides structured information that is delivered and embedded into the workflows of the company's customers. The IP segment manages an end-to-end portfolio of intellectual property, including patents, trademarks and corporate website domains. The company's brand portfolio includes Web of Science, Derwent, Cortellis, DRG, CompuMark, MarkMonitor and CPA Global.
On Nov. 12, the stock was trading at $22.79 per share with a market cap of $14.59 billion. There is not currently enough data to display a GF Value Line and share prices have fallen since a high hit in June.
GuruFocus gives the company a financial strength rating 4 out of 10 and a profitability rank of 2 out of 10. There are two severe warning signs issued for a Beneish M-Score indicating the company may manipulate its financials and an Altman Z-Score placing the company in the distress column. The company’s cash-to-debt ratio of 0.46 ranks it worse than 81.60% of industry competitors after a spike in debt in 2020.
Other top guru shareholders in Clarivate (CLVT, Financial) include Ron Baron (Trades, Portfolio), Pioneer Investments, George Soros (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Steven Cohen (Trades, Portfolio).
Cisco
Gore’s Cisco (CSCO, Financial) position was slashed by 36.34% with the sale of 8.60 million shares. The sale marks the first big reduction in the guru’s holding since it was established in the third quarter of 2020. The shares traded at an average price of $56.12 during the quarter, landing the holding at a total estimated gain of 30.87%. The sale had a -1.97% impact on the equity portfolio overall.
Cisco is the world's largest hardware and software supplier within the networking solutions sector. The company's wide array of hardware is complemented with solutions for software-defined networking, analytics and intent-based networking. In collaboration with Cisco's initiative on growing software and services, its revenue model is focused on increasing subscriptions and recurring sales.
As of Nov. 12, the stock was trading at $56.96 per share with a market cap of $240.30 billion. According to the GF Value Line, the stock is trading at a modestly overvalued rating.
GuruFocus gives the company a financial strength rating of 6 out of 10, a profitability rank of 9 out of 10 and a valuation rank of 2 out of 10. There are currently no severe warning signs issued for the company. The company’s exceptional operating and net margins surpass at least 94% of industry competitors.
Cisco (CSCO, Financial) shares are also owned by Dodge & Cox, Ken Fisher (Trades, Portfolio), Pioneer Investments, Primecap Management and Jeremy Grantham (Trades, Portfolio).
Equifax
For the second quarter in a row, the guru pulled back his Equifax (EFX, Financial) holding. The sale of 1.85 million shares cut the holding by 39.45% and the shares traded at an average price of $259.92 during the quarter. GuruFocus estimates the total gain of the holding at 60.97% and the sale had a -1.84% impact on the equity portfolio.
Along with Experian and TransUnion, Equifax is one of the leading credit bureaus in the United States. Equifax's credit reports provide credit histories on millions of consumers, and the firm's services are critical to lenders' credit decisions. In addition, about a third of the company's revenue comes from workforce solutions, which provides income verification and employer human resources services. Equifax generates over 20% of its revenue from outside the United States.
The stock was trading at $280.05 per share with a market cap of $34.18 billion on Nov. 12. A significantly overvalued rating is given to the stock by the GF Value Line.
GuruFocus gives the company a financial strength rating of 4 out of 10, a profitability rank of 7 out of 10 and a valuation rank of 1 out of 10. There are currently two severe warning signs issued for assets growing faster than revenue and a declining gross margin. While the company maintains a strong profitability rank, it has struggled to balance the weighted average cost of capital and return on invested capital in the last three years.
Jim Simons (Trades, Portfolio), Pioneer Investments, Tom Gayner (Trades, Portfolio), Robert Olstein (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio) also hold Equifax (EFX, Financial) shares.
Remitly Global
The guru’s second new holding was established in Remitly (RELY, Financial). The 11.07 million shares were purchased throughout the quarter at an average price of $40.89. Overall, the purchase had a 1.69% impact on the equity portfolio and GuruFocus estimates the total loss of the holding at 25.37% during its short lifetime.
Remitly Global provides integrated financial services to immigrants, including helping customers send money internationally in a quick, reliable and more cost-effective manner by leveraging digital channels. It supports cross-border transmissions around the world. Its revenue is generated on transaction fees charged to customers and foreign exchange spreads between the foreign exchange rate offered to customers and the foreign exchange rate on the company's currency purchases.
On Nov. 12, the stock was trading at $30.50 per share with a market cap of $4.92 billion. There is not currently enough data to display a GF Value Line and share prices have decreased significantly since the company started trading publicly.
GuruFocus gives the company a financial strength rating of 6 out of 10 and a profitability rank of 1 out of 10. There are currently no severe warning signs issued for the company. The company has reported positive revenue over the last two years, but reported cash flows fell deep into the red in 2020.
Intel
Rounding out the guru’s top five trades was an addition to his Intel (INTC, Financial) holding. The holding was established in the second quarter of 2021 and grew by 75.06% with the purchase of 5.31 million shares. The holding shows an 11.24% loss over the last two quarters and the addition had a 1.17% impact on the equity portfolio overall.
Intel is the world's largest chipmaker. It designs and manufactures microprocessors for the global personal computer and data center markets. While Intel's server processor business has benefited from the shift to the cloud, the firm has also been expanding into new adjacencies as the personal computer market has stagnated. These include areas such as the internet of things, artificial intelligence and automotive. Intel has been active on the merger and acquisitions front, acquiring Altera, Mobileye and Habana Labs in order to bolster these efforts in non-PC arenas.
As of Nov. 12, the stock was trading at $50.48 per share with a market cap of $205.67 billion. According to the GF Value Line, the stock is trading at a modestly undervalued rating.
GuruFocus gives the company a financial strength rating of 6 out of 10, a profitability rank of 9 out of 10 and a valuation rank of 10 out of 10. There is currently one severe warning sign issued for a declining gross margin. The company has maintained strong revenue growth over the last five years and consistent net income during the same period.
Gore is joined by Primecap Management, Ken Fisher (Trades, Portfolio), Seth Klarman (Trades, Portfolio), Daniel Loeb (Trades, Portfolio) and Chris Davis (Trades, Portfolio) as top guru shareholders of Intel (INTC, Financial).
