Steven Romick (Trades, Portfolio), portfolio manager of the FPA Crescent Fund, invests in long / short equity positions and short-term bonds. During fourth-quarter 2016, the manager eliminated his position in Halliburton Co. (HAL, Financial) and expanded positions in Yahoo Inc. (YHOO, Financial) and Baidu Inc. (BIDU, Financial).
Halliburton
Romick sold his 2,926,070-share stake in Halliburton at an average share price of $49.86. As of Jan. 10, 2017, the Houston-based oil equipment and services company has a weak Piotroski F-score of 2 and a modest Altman Z-score of 2.55, the former implying poor business operations. Additionally, the company’s operating margin, return on equity and Greenblatt return on capital are near a 10-year low, suggesting low profitability.
Halliburton announced an “agreement in principle” to settle the Erica John Fund class action lawsuit Dec. 23, 2016. As discussed in the press release, the lead plaintiff filed the lawsuit in 2002 “asserting claims in connection with accounting for long-term construction projects.” Halliburton appealed the July 2015 District Court ruling that certified one of the plaintiff’s six “corrective disclosures” from the settlement. The company expects to fund about 54% of the $100 million settlement fund, and the settlement remains subject to District approval.
Yahoo
The FPA Crescent Fund manager purchased 1,434,570 shares of Yahoo, increasing his position 42.04%. The company stock averaged $41 per share during fourth-quarter 2016.
Yahoo’s board of directors has reduced the size of the board following the company’s pending sale of its operating business to Verizon Communications Inc. (VZ) to five, with Eric Brandt serving as chairman. Additionally, CEO Marissa Mayer indicated that she will resign following the closing of the merger and the company name will change to Altaba Inc.
Baidu
Romick purchased 567,148 shares of Baidu, increasing his position 79.34%. The Chinese online media company averaged $170.19 per share during fourth-quarter 2016.
As of January 2017, Baidu maintained a GuruFocus four-star predictability rank, suggesting the company has consistent per-share revenue and EBITDA growth. The company’s three-year revenue growth and three-year EBITDA growth outperform 91% and 86% of global Internet content and information companies.
See also
As a long-term investor, Steven Romick (Trades, Portfolio) also looks at Shiller price-earnings ratios for market valuations. The market Shiller P/E is currently 28.2, about 68.90% higher than the historical mean of 16.7.
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Disclosure: The author has no position in the stocks mentioned in the article.
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