Media-shy investment firm Primecap Management revealed earlier this week it boosted its stake in Pulmonx Corp. (LUNG, Financial), impacting the equity portfolio by 0.03%.
The California-based firm, which was founded in 1983, manages the Odyssey Funds. It seeks to provide long-term capital appreciation by investing in companies with stronger growth potential than their valuations suggest and that trade at reasonable prices.
According to GuruFocus Real-Time Picks, a Premium feature, Primecap increased its position in the medical device manufacturer by 42% on Nov. 30, buying 1.25 million shares. The stock traded for an average price of $32.30 per share on the day of the transaction.
Primecap now holds 4.2 million shares of Pulmonx total, accounting for 0.10% of the equity portfolio. Established in the fourth quarter of 2020, GuruFocus estimates the firm has lost 15.59% on the investment so far.
Headquartered in Redwood, California, the company, which manufactures the Zephyr Endobronchial Valve to treat patients with emphysema stemming from chronic obstructive pulmonary disease, has a $1.31 billion market cap; its shares were trading around $35.22 on Friday with a price-book ratio of 6.44 and a price-sales ratio of 28.62.
Since its initial public offering in October 2020, the stock has fallen around 12%.
The company reported its third-quarter results on Nov. 2. Pulmonx posted revenue of $13.3 million, an increase of 25% from the prior-year quarter. It also recorded a net loss of $10.18 million, equating to a loss of 28 cents per share.
GuruFocus rated Pulmonx’s financial strength 6 out of 10. In addition to debt-related ratios that top a majority of industry peers, the robust Altman Z-Score of 16.51 indicates the company is in good standing.
The company’s profitability did not fare as well, scoring a 1 out of 10 rating on the back of negative margins and returns on equity, assets and capital that underperform a majority of competitors. Pulmonx has also recorded a decline in revenue per share over the past 12 months.
Primecap is the company’s largest guru shareholder with an 11.46% stake. Other top guru investors include Louis Moore Bacon (Trades, Portfolio), Steven Cohen (Trades, Portfolio), the Eaton Vance Worldwide Health Sciences Fund (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Ray Dalio (Trades, Portfolio), Lee Ainslie (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio).
Portfolio composition and performance
Nearly 60% of the firm’s $141.65 billion equity portfolio, which was composed of 337 stocks as of the end of the third quarter, is invested in the technology and health care sectors.
Primecap’s five largest holdings as of Sept. 30 were Eli Lilly and Co. (LLY, Financial), Microsoft Corp. (MSFT, Financial), Biogen Inc. (BIIB, Financial), Adobe Inc. (ADBE, Financial) and Texas Instruments Inc. (TXN, Financial).
GuruFocus data shows the firm returned 17.25% in 2020, slightly underperforming the S&P 500’s 18.4% return.
