When searching for value investment opportunities, Oakmark Fund manager Bill Nygren (Trades, Portfolio) takes the approach of a business owner, seeing each position as owning a piece of the business as opposed to just a stock certificate.
To achieve long-term capital appreciation, the renowned guru, who also manages the Chicago-based firm’s Select and Global Select funds, usually invests in mid- and large-cap companies. When picking stocks, he looks for growing companies that have shareholder-oriented management teams. According to the fund’s fact sheet, he prefers to take a position when the stock is trading at a substantial discount to his estimate of intrinsic value, then waits for the gap to close before selling.
As of the end of the second quarter, the communication services sector had the second-largest representation in Nygren’s $13.19 billion equity portfolio with a weight of 18.87%.
According to his 13F filing, Nygren’s five biggest communication services holdings as of the end of the three months ended June 30 were Alphabet Inc. (GOOGL, Financial), Meta Platforms Inc. (META, Financial), Netflix Inc. (NFLX, Financial), Pinterest Inc. (PINS, Financial) and Comcast Corp. (CMCSA, Financial).
Investors should be aware that 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
Alphabet
In the second quarter, the guru curbed his stake in Alphabet’s (GOOGL, Financial) class A stock by 2.34% to 4.09 million shares. The position accounts for 3.39% of the equity portfolio and is his second-largest holding. GuruFocus estimates Nygren has gained 47.35% on the investment so far.
The Mountain View, California-based tech conglomerate, which is the parent company of Google and YouTube, has a $1.33 trillion market cap; its Class A shares were trading around $100.78 on Wednesday with a price-earnings ratio of 18.91, a price-book ratio of 5.19 and a price-sales ratio of 4.89.
The GF Value Line suggests the stock is modestly undervalued currently based on historical ratios, past financial performance and analysts’ future earnings projections.
Alphabet’s financial strength and profitability were both rated 9 out of 10 by GuruFocus. In addition to a comfortable level of interest coverage, the company is supported by a robust Altman Z-score of 10.69 that indicates it is in good standing. The return on invested capital also overshadows the weighted average cost of capital, meaning value is being created as the company grows.
Along with operating margin expansion, the company is supported by strong returns on equity, assets and capital that top a majority of competitors. It also has a high Piotroski F-Score of 7 out of 9, which means conditions are healthy. Boosted by consistent earnings and revenue growth, Alphabet also has a predictability rank of two out of five stars. According to GuruFocus research, companies with this rank return an average of 6% annually over a 10-year period.
Of the gurus invested in Alphabet’s class A stock, Ken Fisher (Trades, Portfolio) has the largest stake with 0.02% of its outstanding shares. PRIMECAP Management (Trades, Portfolio), Spiros Segalas (Trades, Portfolio), Dodge & Cox, Frank Sands (Trades, Portfolio), Chris Davis (Trades, Portfolio), Diamond Hill Capital (Trades, Portfolio), Hotchkis & Wiley and many other gurus also own the stock.
Meta Platforms
Nygren upped his Meta Platforms (META, Financial) stake by 60.51% during the quarter to 2.14 million shares, which represent 2.61% of the equity portfolio and is his seventh-largest holding. GuruFocus says he has gained an estimated 3.44% on the investment since the first quarter of 2018.
The social media company formerly known as Facebook, which is headquartered in Menlo Park, California, has a market cap of $383.70 billion; its shares were trading around $143.50 on Wednesday with a price-earnings ratio of 11.95, a price-book ratio of 3.10 and a price-sales ratio of 3.35.
According to the GF Value Line, the stock is significantly undervalued currently.
GuruFocus rated Meta Platforms’ financial strength 8 out of 10 due to adequate interest coverage and a high Altman Z-Score of 7.65 that indicates it is in good standing. The ROIC also eclipses the WACC, so value creation is occurring.
The company’s profitability fared even better with a 10 out of 10 rating. Despite recording a decline in its margins, Meta is supported by strong returns that outperform a majority of industry peers. It also has a moderate Piotroski F-Score of 4, indicating conditions are typical for a stable company. Despite recording steady earnings and revenue growth, the 4.5-star predictability rank is on watch. GuruFocus data shows companies with this rank return an average of 10.6% annually.
With a 0.44% stake, Dodge & Cox is Meta’s largest guru shareholder. Other top guru investors include Fisher, Baillie Gifford (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, First Eagle Investment (Trades, Portfolio), Steve Mandel (Trades, Portfolio), Chase Coleman (Trades, Portfolio), Davis and Andreas Halvorsen (Trades, Portfolio).
Netflix
The investor increased his Netflix (NFLX, Financial) position by 89.24% to 1.71 million shares during the second quarter, which make up 2.27% of the equity portfolio. GuruFocus data shows Nygren has gained an estimated 29.18% on the investment over its lifetime.
The streaming giant based in Los Gatos, California has a $107.98 billion market cap; its shares were trading around $245.50 on Wednesday with a price-earnings ratio of 21.58, a price-book ratio of 5.65 and a price-sales ratio of 3.56.
Based on the GF Value Line, the stock appears to be significantly undervalued currently.
Netflix’s financial strength was rated 6 out of 10 by GuruFocus, driven by sufficient interest coverage and a high Altman Z-Score of 4. The ROIC also exceeds the WACC, so value is being created.
The company’s profitability fared even better, scoring a 9 out of 10 rating on the back of operating margin expansion, strong returns that outperform a majority of competitors and a moderate Piotroski F-Score of 6. Consistent earnings and revenue growth contributed to a five-star predictability rank. GuruFocus found companies with this rank return, on average, 12.1% annually.
Baillie Gifford (Trades, Portfolio) is Netflix’s largest guru shareholder with a 1.68% stake. Fisher, Sands, Ruane Cunniff (Trades, Portfolio) and Philippe Laffont (Trades, Portfolio) also have significant holdings.
Nygren boosted his holding of Pinterest (PINS, Financial) by 50% in the most recent quarter. Reflecting 2.07% of the equity portfolio, he now owns 15 million shares. GuruFocus says he has gained approximately 12.96% on the investment since establishing it in the first quarter of 2022.
The social networking company headquartered in San Francisco, which operates a platform where users can save and share everything from fashion and favorite books to recipes and craft ideas, has a market cap of $16.39 billion; its shares were trading around $24.44 on Wednesday with a price-earnings ratio of 78.83, a price-book ratio of 5.21 and a price-sales ratio of 6.07.
The GF Value Line suggests the stock, while undervalued, is currently a possible value trap. As such, potential investors should do thorough research before making a decision.
GuruFocus rated Pinterest’s financial strength 9 out of 10 on the back of adequate interest coverage and a robust Altman Z-Score of 19.04 that indicates it is in good standing. Value is being created since the ROIC surpasses the WACC.
The company’s profitability did not fare as well with a 2 out of 10 rating despite having margins and returns that top over half of its industry peers. Pinterest also has a moderate Piotroski F-Score of 6.
Of the gurus invested in Pinterest, Nygren now has the largest stake with 2.23% of its outstanding shares. Simons’ firm, Baillie Gifford (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio), Laffont, Ray Dalio (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio) also own the stock.
Comcast
The guru increased the Comcast (CMCSA, Financial) stake by 9.58% to 6.86 million shares. The stock has a weight of 2.04% in the equity portfolio. GuruFocus data shows Nygren has gained an estimated 62.59% on the long-held investment.
The Philadelphia-based media and technology company, which owns traditional cable businesses as well as NBCUniversal, has a $145.12 billion market cap; its shares were trading around $32.76 on Wednesday with a price-earnings ratio of 10.75, a price-book ratio of 1.59 and a price-sales ratio of 1.23.
According to the GF Value Line, the stock, while undervalued, is a possible value trap. As a result, potential investors should conduct thorough research before making a decision.
Comcast’s financial strength was rated 4 out of 10 by GuruFocus. Despite having sufficient interest coverage, the Altman Z-Score of 1.55 warns it could be in danger of bankruptcy. The ROIC is also above the WACC, so value is being created.
The company’s profitability scored a 9 out of 10 rating. Although the operating margin is in decline, its returns outperform over half of its competitors. Comcast also has a high Piotroski F-Score of 8, while steady earnings and revenue growth contributed to a five-star predictability rank.
With a 1.93% stake, Dodge & Cox is the largest guru shareholder of Comcast. Other top guru investors include First Eagle, Barrow, Hanley, Mewhinney & Strauss, First Pacific Advisors (Trades, Portfolio), Hotchkis & Wiley, Steven Romick (Trades, Portfolio), the T. Rowe Price Equity Income Fund, Diamond Hill, Tom Russo (Trades, Portfolio), Charles Brandes (Trades, Portfolio), the Parnassus Endeavor Fund (Trades, Portfolio) and Dalio.
Additional holdings in the communication services space
Other stocks Nygren owns in the communication services sector as of the end of the second quarter are Charter Communications Inc. (CHTR, Financial), Take-Two Interactive Software Inc. (TTWO, Financial), Liberty Broadband Corp. (LBRDK, Financial), The Walt Disney Co. (DIS, Financial) and T-Mobile US Inc. (TMUS, Financial).
