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Heebner's Capital Growth Management Shuffles Top Holdings

New position in Whirlpool lands in top five holdings during the third quarter

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Nov 30, 2021
Summary
  • Firm boosts its largest holding in Jones Lang LaSalle.
  • New positions were established in Whirlpool and Avis Budget Group.
  • Philip Morris International and Dick's Sporting Goods were cut from the portfolio.
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Ken Heebner (Trades, Portfolio)’s Capital Growth Management has revealed its portfolio for the third quarter of 2021. The firm’s top trades include an addition to its top holding in Jones Lang LaSalle Inc. (JLL, Financial), selling out of Philip Morris International Inc. (PM, Financial) and Dick’s Sporting Goods Inc. (DKS, Financial) positions and new buys into Whirlpool Corp. (WHR, Financial) and Avis Budget Group Inc. (CAR, Financial).

Heebner is a growth-oriented investor. He has a history of making bold and swift sector calls. Fiercely independent, he is not afraid to make large bets based on his convictions that may differ from the market consensus.

Portfolio overview

At the end of the quarter, the firm’s portfolio contained 55 stocks with 25 new holdings. It was valued $1.09 billion and has seen a 49% turnover rate. The firm’s top holdings include Jones Lang LaSalle, Signet Jewelers Ltd. (SIG), Select Medical Holdings Corp. (SEM), Whirlpool and Prudential Financial Inc. (PRU).

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The top sectors represented in the portfolio include real estate (44.99%), consumer cyclical (15.24%) and energy (11.78%).

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Jones Lang LaSalle

The firm’s top trade was an addition to its largest holding Jones Lang LaSalle (

JLL, Financial). Managers purchased 165,000 shares throughout the quarter to grow the holding by 137.50%. The shares traded at an average price of $228.03 throughout the quarter and GuruFocus estimates the total gain of the holding at 6.83%. Overall, the purchase had a 3.76% impact on the equity portfolio.

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Jones Lang LaSalle provides a wide range of real estate-related services to owners, occupiers and investors worldwide, including leasing, property and project management, and capital markets advisory. The company's investment management arm, LaSalle Investment Management, manages over $60 billion for clients across diverse public and private real estate strategies.

On Nov. 30, the stock was trading at $238.07 per share with a market cap of $12.14 billion. According to the GF Value Line, the stock is trading at a significantly overvalued rating.

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GuruFocus gives the company a financial strength rating of 5 out of 10, a profitability rank of 8 out of 10 and a valuation rank of 7 out of 10. There are two severe warning signs issued for assets growing faster than revenue and a declining operating margin. A medium warning sign cautions investors against the company’s new long-term debt that has spiked in the last two years.

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Other top guru shareholders in Jones Lang LaSalle (

JLL, Financial) include Al Gore (Trades, Portfolio), John Rogers (Trades, Portfolio), Lee Ainslie (Trades, Portfolio), Ron Baron (Trades, Portfolio) and Diamond Hill Capital (Trades, Portfolio).

Philip Morris International

Managers sold out of the firm’s Philip Morris International (

PM, Financial) for the fifth time in the last decade. The 380,000 shares that were purchased in the second quarter were sold throughout the third quarter at an average price of $100.67. The sale had an overall impact of -3.40% on the equity portfolio and GuruFocus estimates the firm has gained 7.56% on the holding throughout its lifetime.

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Philip Morris International is a leading international tobacco company engaged in the manufacture and sale of cigarettes and other nicotine-containing products in markets outside the United States. Through multidisciplinary capabilities in product development, state-of-the-art facilities and scientific substantiation, the company aims to ensure that its smoke-free products meet adult consumer preferences and rigorous regulatory requirements. Management's vision is that these products ultimately replace cigarettes.

As of Nov. 30, the stock was trading at $86.67 per share with a market cap of $134.63 billion. The GF Value Line shows the stock trading at a fair value rating.

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GuruFocus gives the company a financial strength rating of 4 out of 10, a profitability rank of 8 out of 10 and a valuation rank of 6 out of 10. There is one severe warning sign issued for a declining operating margin. Despite the warning sign, the company’s operating margin exceeds 87.80% of competitors and is backed by an equally strong net margin.

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Philip Morris International (

PM, Financial) shares are also owned by First Eagle Investment (Trades, Portfolio), Tom Russo (Trades, Portfolio), John Rogers (Trades, Portfolio), the Global Franchise Portfolio and the T Rowe Price Equity Income Fund (Trades, Portfolio).

Dick’s Sporting Goods

The firm also cut ties with its Dick’s Sporting Goods (

DKS, Financial) position. Managers sold 360,000 shares during the quarter that traded at an average price of $116.48. The firm has gained 33.07% on the position throughout the last year of intermittent ownership and the sale had a -3.25% impact on the equity portfolio.

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Dick's Sporting Goods retails athletic apparel, footwear and equipment for sports. Dick's operates about 730 stores, warehouse stores and about 125 specialty stores under the Golf Galaxy, Public Lands and Field & Stream names. Dick's also operates e-commerce sites, including youth sports site Team Sports HQ. Dick's carries private-label merchandise and national brands such as Nike, The North Face, Under Armour, Callaway Golf and TaylorMade.

The stock was trading at $119.05 per share with a market cap of $10.32 billion on Nov. 30. A significantly overvalued rating is given to the stock by the GF Value Line.

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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 5 out of 10. There are two severe warning signs issued for assets growing faster than revenue and a declining operating margin. The company maintained consistent cash flows throughout the last decade and 2021 saw a major spike in free cash flow.

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Jim Simons (Trades, Portfolio)' Renaissance Technologies, Lee Ainslie (Trades, Portfolio), John Hussman (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio) also own Dick’s Sporting Goods (DKS, Financial) shares.

Whirlpool

A new holding established in Whirlpool (

WHR, Financial) landed as the fourth-largest holding in the firm’s equity portfolio. The holding was established with the purchase of 173,000 shares that traded at an average price of $219.46 throughout the quarter. Overall, the purchase had a 3.24% impact on the portfolio and GuruFocus estimates the total gain of the holding at 9.41%.

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Whirlpool is a global manufacturer and marketer of major home appliances and related products. Its segments consist of North America, Europe/Middle East/Africa, Latin America and Asia. Most of the company's sales occur in North America. Products are divided into various classes, including laundry appliances, refrigerators and freezers and cooking appliances. The majority of revenue is derived from the laundry appliances and refrigerators and freezers classes. Whirlpool also sells its products to other manufacturers, distributors and retailers for resale across its geographic segments. The company's major international brands include Whirlpool, KitchenAid, Maytag, Consul and Brastemp, among others.

On Nov. 30, the stock was trading at $218.40 per share with a market cap of $13.29 billion. According to the GF Value Line, the stock is trading at a significantly overvalued rating.

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GuruFocus gives the company a financial strength rating of 5 out of 10, a profitability rank of 7 out of 10 and a valuation rank of 7 out of 10. There are no severe warning signs issued for the company. The company has maintained consistent revenue throughout the last decade although net income fell into the red in 2018.

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Other top guru shareholders in Whirlpool (

WHR, Financial) include Primecap Management, Tom Gayner (Trades, Portfolio), Barrow, Hanley, Mewhinney & Strauss, Pioneer Investments and Jeremy Grantham (Trades, Portfolio).

Avis Budget Group

Rounding out the firm’s top trades was a new buy into Avis Budget Group (

CAR, Financial). Managers purchased 280,000 shares at an average price of $88.06 throughout the quarter to establish the holding. The last decade has seen the holding stack up a total estimated gain of 86.03% and the purchase had a 2.99% impact on the equity portfolio overall.

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Avis Budget Group is a provider of automotive vehicle rental and car-sharing services. Its brands include Avis, Budget and Zipcar. Avis is targeted to serve the premium commercial and leisure segments of the travel industry, while Budget is focused on value-conscious customers. The company operates its own network of rental locations and licenses its brands to franchisees. Zipcar is a car-sharing service that allows members to use the company-owned Zipcar fleet at an hourly rate. The company's largest region by revenue is the Americas.

As of Nov. 30, the stock was trading at $276.25 per share with a market cap of $15.66 billion. The stock is trading at a significantly overvalued rating according to the GF Value Line.

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GuruFocus gives the company a financial strength rating of 3 out of 10, a profitability rank of 6 out of 10 and a valuation rank of 1 out of 10. There are four severe warning signs issued, including declining revenue per share, poor financial strength, a Sloan ratio indicating poor quality of earnings and an Altman Z-Score placing the company in the distress column. The company’s weighted average cost of capital has frequently exceeded the return on invested capital, indicating capital efficiency issues.

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Avis Budget Group (

CAR, Financial) shares are also owned by Paul Tudor Jones (Trades, Portfolio), Lee Ainslie (Trades, Portfolio), Caxton Associates (Trades, Portfolio) and Pioneer Investments.

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I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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