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Scott Black Enters ASE Technology, Dumps 2 Defense Stocks

Guru reveals 4th-quarter portfolio

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Mar 04, 2022
Summary
  • The investor entered a new position in ASE Technology.
  • Black also trimmed his West Fraser Timber holding.
  • He sold out of Concentrix, Lockheed Martin and Northrop Grumman.
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Delphi Management leader

Scott Black (Trades, Portfolio) released his portfolio for the fourth quarter of 2021 in February.

A disciple of the Graham-Dodd school of value investing, the guru’s Boston-based firm takes long positions in companies that exhibit “a low absolute valuation” that are run by good management teams. The firm is also known for contacting the management team of every company it invests in.

During the three months ended Dec. 31, the investor’s 13F filing showed he entered seven new positions, sold out of 14 stocks and added to or trimmed a number of other existing investments. His most notable trades included a new holding in ASE Technology Holding Co. Ltd. (

ASX, Financial), a reduced bet on West Fraser Timber Co. Ltd. (WFG, Financial) and the divestment of the Concentrix Corp. (CNXC, Financial), Lockheed Martin Corp. (LMT, Financial) and Northrop Grumman Corp. (NOC, Financial) positions.

ASE Technology

The guru invested in 151,514 shares of ASE Technology (

ASX, Financial), dedicating 1.11% of the equity portfolio to the position. The stock traded for an average price of $7.35 per share during the quarter.

The Taiwanese company, which assembles and tests semiconductors, has a $15.3 billion market cap; its shares were trading around $7.16 on Friday with a price-earnings ratio of 7, a price-book ratio of 1.66 and a price-sales ratio of 0.77.

The GF Value Line suggests the stock is fairly valued based on its historical ratios, past performance and future earnings projections.

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GuruFocus rated ASE Technology’s financial strength 4 out of 10. Although the company has issued new long-term debt in recent years, it is still at a manageable level due to adequate interest coverage. The Altman Z-Score of 2.06, however, indicates the company is under some pressure. The return on invested capital also overshadows the weighted average cost of capital, meaning value is being created as the company grows.

The company’s profitability scored an 8 out of 10 rating, driven by margins and returns on equity, assets and capital that outperform over half of its competitors. ASE Technology also has a high Piotroski F-Score of 8 out of 9, implying business conditions are healthy, and a predictability rank of one out of five stars. According to GuruFocus, companies with this rank return an average of 1.1% annually over a 10-year period.

Of the gurus invested in ASE,

Ken Fisher (Trades, Portfolio) has the largest stake with 1.23% of its outstanding shares. Paul Tudor Jones (Trades, Portfolio) also owns the stock.

West Fraser Timber

Impacting the equity portfolio by -1.71%, the investor curbed the West Fraser Timber (

WFG, Financial) holding by 73.2%, selling 21,235 shares. Shares traded for an average price of $86.59 each during the quarter.

Black now holds 7,773 shares total, accounting for 0.70% of the equity portfolio. GuruFocus estimates he has gained 26.33% on the investment so far.

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The Canadian forestry company, which produces lumber, plywood, pulp, newsprint, wood chips and other products, has a market cap of $10.2 billion; its shares were trading around $96.33 on Friday with a price-earnings ratio of 3.78, a price-book ratio of 1.36 and a price-sales ratio of 1.05.

According to the GF Value Line, the stock is modestly overvalued currently.

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West Fraser Timber’s financial strength was rated 7 out of 10 by GuruFocus. In addition to a comfortable level of interest coverage, the robust Altman Z-Score of 5.29 indicates it is in good standing even though assets are building up at a faster rate than revenue is growing. Value creation is also occurring since the ROIC eclipses the WACC.

The company’s profitability fared even better with a 10 out of 10 rating. It is being supported by strong margins and returns that outperform a majority of industry peers as well as a high Piotroski F-Score of 8. As a result of consistent earnings and revenue growth, West Fraser Timber has a four-star predictability rank. GuruFocus data shows companies with this rank return, on average, 9.8% annually.

With 0.33% of outstanding shares,

Murray Stahl (Trades, Portfolio) is West Fraser’s largest guru shareholder. Other guru investors are Jeremy Grantham (Trades, Portfolio), Ken Heebner (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Ray Dalio (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio) and Lee Ainslie (Trades, Portfolio).

Concentrix

With a -1.22% impact on the equity portfolio, Black dumped all 6,670 shares of Concentrix (

CNXC, Financial). The stock traded for an average per-share price of $178.35 during the quarter.

He gained an estimated 43.42% on the investment according to GuruFocus.

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The Fremont, California-based business services company specializing in customer engagement and business performance has a $10.15 billion market cap; its shares were trading around $192.35 on Friday with a price-earnings ratio of 25.24, a price-book ratio of 3.82 and a price-sales ratio of 1.79.

Since being spun off from TD Synnex Corp. (

SNX, Financial) in December of 2020, the stock has climbed nearly 140%.

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GuruFocus rated Concentrix’s financial strength 7 out of 10. Along with sufficient interest coverage, the high Altman Z-Score of 4.37 indicates the company is in good standing. The ROIC also exceeds the WACC, so good value creation is occurring.

The company’s profitability did not fare as well, scoring a 4 out of 10 rating. Regardless, it is supported by strong margins, returns that top a majority of competitors and a high Piotroski F-Score of 8.

Sarah Ketterer (Trades, Portfolio) has the largest holding in Concentrix with 0.95% of its outstanding shares. Tweedy Browne (Trades, Portfolio), Steven Scruggs (Trades, Portfolio), David Einhorn (Trades, Portfolio), Simons’ firm, Chuck Royce (Trades, Portfolio), Greenblatt and John Hussman (Trades, Portfolio) also have positions in the stock.

Lockheed Martin

The guru sold all 3,200 shares of Lockheed Martin (

LMT, Financial), which had an impact of -1.14% on the equity portfolio. During the quarter, the stock traded for an average price of $345.82 per share.

GuruFocus estimates he gained 11.41% on the investment, which was established in the fourth quarter of 2018.

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The aerospace and defense company, which is headquartered in Bethesda, Maryland, has a market cap of $123.17 billion; its shares were trading around $454 on Friday with a price-earnings ratio of 19.87, a price-book ratio of 11.18 and a price-sales ratio of 1.87.

Based on the GF Value Line, the stock appears to be modestly overvalued currently.

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Lockheed Martin’s financial strength was rated 6 out of 10 by GuruFocus. In addition to a comfortable level of interest coverage, the company’s Altman Z-Score of 4.41 indicates it is in good standing. The ROIC also surpasses the WACC, implying good value creation is occurring.

The company’s profitability fared even better with a 9 out of 10 rating. In addition to operating margin expansion, its returns outperform a majority of industry peers. Lockheed Martin also has a high Piotroski F-Score of 7 and a 2.5-star predictability rank, which is on watch as a result of revenue per share growth slowing down over the past 12 months. GuruFocus says companies with this rank return an average of 7.3% annually.

Of the gurus invested in the stock,

Yacktman Asset Management (Trades, Portfolio) and its two funds have the largest position with a combined 0.23% of outstanding shares. Catherine Wood (Trades, Portfolio), Simons’ firm, Dalio, Greenblatt, Richard Snow (Trades, Portfolio), John Rogers (Trades, Portfolio), Ronald Muhlenkamp (Trades, Portfolio), Stanley Druckenmiller (Trades, Portfolio) and several other gurus also have positions in Lockheed Martin.

Northrop Grumman

With an impact of -1.12% on the equity portfolio, the investor sold the 3,035 remaining shares of Northrop Grumman (

NOC, Financial). Shares traded for an average price of $372.60 each during the quarter.

GuruFocus data shows Black gained an estimated 23% on the investment over its short lifetime.

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The Falls Church, Virginia­-based aerospace and defense company has a $72.51 billion market cap; its shares were trading around $466 on Friday with a price-earnings ratio of 10.68, a price-book ratio of 5.61 and a price-sales ratio of 2.1.

The GF Value Line suggests the stock is modestly overvalued currently.

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GuruFocus rated Northrup Grumman’s financial strength 6 out of 10. In addition to adequate interest coverage, the Altman Z-Score of 3.5 indicates the company is in good standing even though assets are building up at a faster rate than revenue is growing. The ROIC is also higher than the WACC, so value is being created.

The company’s profitability scored a 9 out of 10 rating. Although margins are declining, it is supported by strong returns that outperform a majority of competitors. Northrup Grumman also has a moderate Piotroski F-Score of 6, meaning business conditions are typical for a stable company. Despite a slowdown in revenue per share growth over the past year, it has a 3.5-star predictability rank. Companies with this rank return an average of 9.3% on an annual basis according to GuruFocus.

Holding a combined 0.49% of its outstanding shares,

Yacktman Asset Management (Trades, Portfolio) and its funds are the company’s largest guru shareholder. Other guru investors are Simons’ firm, Greenblatt, Dalio, Heebner, Louis Moore Bacon (Trades, Portfolio), Mario Gabelli (Trades, Portfolio) and Fisher.

Additional trades and portfolio composition

During the quarter, Black also exited positions in Western Digital Corp. (

WDC, Financial), Trinseo PLC (TSE, Financial) and PulteGroup Inc. (PHM, Financial), boosted the Himax Technologies Inc. (HIMX, Financial) holding and entered PVH Corp. (PVH, Financial) and Cleveland-Cliffs Inc. (CLF, Financial).

The guru’s $106 million equity portfolio, which is composed of 95 stocks, is heavily invested in the technology and financial services sectors.

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Disclosures

I/we have no positions in any stocks mentioned, and have no plans to buy any new positions in the stocks mentioned within the next 72 hours. Click for the complete disclosure
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