David Nierenberg (Trades, Portfolio), manager of the D3 Family of Funds, revealed last week he boosted his position in Crawford & Co. (CRD.A, Financial) by 19.38%.
The guru’s Camas, Washington-based firm typically invests in a concentrated number of undervalued, domestic, micro-cap growth stocks. He is known to take activist positions in some circumstances.
According to GuruFocus Real-Time Picks, a Premium feature, Nierenberg invested in 6,433 Class A shares of the Atlanta-based company on Nov. 18, impacting the equity portfolio by 0.04%. The stock traded for an average price of $8.02 per share on the day of the transaction.
He now holds 39,624 shares total, giving it 0.25% space in the equity portfolio. GuruFocus estimates Nierenberg has gained 12.12% on the investment since establishing it in the fourth quarter of 2020.
The world’s largest independent insurance claims management company has a $400.59 million market cap; its shares were trading around $7.81 on Monday with a price-earnings ratio of 10.99, a price-book ratio of 1.87 and a price-sales ratio of 0.38.
The GF Value Line, which is based on historical ratios, past performance and future earnings projections, suggests the stock is modestly undervalued currently.
On Nov. 8, Crawford released its third-quarter results. The company posted earnings of 20 cents per share on $288.5 million in revenue, which was a 14% increase from the prior-year quarter.
Having announced a quarterly dividend of 6 cents per share on Nov. 5, the company also revealed the board had authorized a share repurchase program. Crawford may repurchase up to 2 million shares of its common stock until Dec. 31, 2023.
GuruFocus rated Crawford’s financial strength 5 out of 10. Despite having adequate interest coverage, the Altman Z-Score of 2.63 indicates the company is under some pressure. The return on invested capital, however, eclipses the weighted average cost of capital, meaning value is being created as the company grows.
The company’s profitability fared a bit better with a 6 out of 10 rating. While its margins are underperforming over half of its competitors, the returns on equity, assets and capital are outperforming versus other industry peers. Crawford is also supported by a moderate Piotroski F-Score of 5 out of 9, indicating operations are typical for a stable company. Although revenue per share has declined in the past five years, the company still has a predictability rank of one out of five stars. GuruFocus data shows companies with this rank return an average of 1.1% annually over a 10-year period.
Of the gurus invested in Crawford, Jim Simons (Trades, Portfolio)’ Renaissance Technologies has the largest holding with 1.2% of its outstanding shares. Chuck Royce (Trades, Portfolio) and Charles Brandes (Trades, Portfolio) also own the stock.
Portfolio composition
The investor’s $129 million equity portfolio, which was composed of39 stocks as of the end of the third quarter, was largely invested in the financial services sector, followed by smaller positions in the industrials and energy spaces.
Other financial services stocks Nierenberg held as of Sept. 30 were Mr. Cooper Group Inc. (COO, Financial), Class B shares of Crawford (CRD.B, Financial), Pzena Investment Management Inc. (PZN, Financial), Flushing Financial Corp. (FFIC, Financial) and Hope Bancorp Inc. (HOPE, Financial).
