Bill Nygren (Trades, Portfolio), manager of the Oakmark Fund, disclosed in a regulatory filing that his top buys during the third quarter included a boost to the holding in Wells Fargo & Co. (WFC, Financial) and new positions in Etsy Inc. (ETSY, Financial), Uber Technologies Inc. (UBER, Financial), Fortune Brands Home & Security Inc. (FBHS, Financial) and Warner Bros. Discovery Inc. (WBD, Financial).
The guru's Chicago-based fund seeks long-term capital appreciation by investing in stocks that the fund managers believe are trading at a discount to intrinsic value. Oakmark evaluates candidate companies by looking at free cash flows and management ownership.
As of September, the fund’s $12.96 billion equity portfolio contains 56 stocks with a quarterly turnover ratio of 11%. The top four sectors in terms of weight are financial services, communication services, consumer cyclical and technology, representing 32.38%, 18.67%, 13.11% and 11.24% of the equity portfolio.
Investors should be aware that portfolio updates for mutual funds do not necessarily provide a complete picture of a guru’s holdings. The data is sourced from the quarterly updates on the website of the fund(s) in question. This usually consists of long equity positions in U.S. and foreign stocks. All numbers are as of the quarter’s end only; it is possible the guru may have already made changes to the positions after the quarter ended. However, even this limited data can provide valuable information.
Wells Fargo
Oakmark purchased 3.513 million shares of Wells Fargo (WFC, Financial), expanding the position by 47.15% and its equity portfolio by 1.09%.
Shares of Wells Fargo averaged $42.96 during the third quarter; the stock is fairly valued based on its price-to-GF Value ratio of 1.05 as of Monday.
The San Francisco-based bank has a GF Score of 76 out of 100 based on a momentum rank of 9 out of 10, a GF Value rank of 5 out of 10, a financial strength rank of 3 out of 10 and a rank of 6 out of 10 for profitability and growth.
Wells Fargo’s profitability ranks 6 out of 10: Although the company has a 4.5-star business predictability rank, its net margin and return on equity are underperforming more than 60% of global competitors.
Other gurus with holdings in Wells Fargo include Dodge & Cox, PRIMECAP Management (Trades, Portfolio) and Chris Davis (Trades, Portfolio)’ Davis Select Advisors.
Etsy
The fund invested in 1.8 million shares of Etsy (ETSY, Financial), allocating 1.39% of equity portfolio space to the stake. Shares averaged $102.06 during the third quarter; the stock is significantly undervalued based on its price-to-GF Value ratio of 0.53 as of Monday.
The Brooklyn, New York-based e-commerce marketplace company has a GF Score of 89 out of 100 based on a rank of 9 out of 10 for growth and momentum, a GF Value rank of 8 out of 10, a profitability rank of 7 out of 10 and a financial strength rank of 5 out of 10.
Etsy’s profitability ranks 7 out of 10 on the back of profit margins increasing by approximately 44% per year on average over the past five years and outperforming over 88% of global competitors despite returns on equity and assets underperforming more than 90% of global retail companies.
Uber Technologies
The fund purchased 5,063,118 shares of Uber Technologies (UBER, Financial), giving the position 1.04% equity portfolio weight. Shares averaged $27.63 during the third quarter.
GuruFocus’ GF Value Line labeled the San Francisco-based rideshare service company a possible value trap based on its low price-to-GF Value ratio of 0.40 as of Monday and low financial strength rank of 4 out of 10.
Uber’s low financial strength is driven by several warning signs, which include a low Piotroski F-score of 3 out of 9 and a debt-to-equity ratio that underperforms more than 96% of global competitors.
Uber has a GF Score of 70 out of 100: Although the stock’s momentum ranks 9 out of 10, Uber’s profitability, GF Value and growth rank just between 4 and 5 out of 10.
Fortune Brands Home & Security
The fund purchased 2.5 million shares of Fortune Brands Home & Security (FBHS, Financial), giving the position 1.04% equity portfolio space.
Shares of Fortune Brands Home & Security averaged $63.54 during the third quarter; the stock is significantly undervalued based on its price-to-GF Value ratio of 0.59 as of Monday.
The Deerfield, Illinois-based home security company has a GF Score of 94 out of 100 based on a growth rank of 10 out of 10, a profitability rank of 9 out of 10, a GF Value rank of 8 out of 10, a momentum rank of 7 out of 10 and a financial strength rank of 5 out of 10.
Warner Bros. Discovery
The fund purchased 10.187 million shares of Warner Bros. Discovery (WBD, Financial), giving the position 0.90% equity portfolio weight. Shares averaged $13.59 during the third quarter.
GuruFocus’ GF Value Line labeled the New York-based media giant a possible value trap based on its low price-to-GF Value ratio of 0.43 and low financial strength rank of 3 out of 10.
Warner Bros. Discovery’s low financial strength is driven by several warning signs, which include a low Piotroski F-score of 3 out of 9, a weak Altman Z-score of 0.29 and a cash-to-debt ratio that underperforms approximately 90% of global competitors.
Despite low financial strength, Warner Bros. Discovery has a GF Score of 85 out of 100, driven by a growth rank of 10 out of 10, a profitability rank of 8 out of 10, a momentum rank of 7 out of 10 and a GF Value rank of 4 out of 10.
