Auxier Asset Management President and CEO Jeff Auxier (Trades, Portfolio) gained three new holdings in the final quarter of 2016. They are Cerner Corp. (CERN, Financial), Yum China Holdings Inc. (YUMC, Financial) and Granite Construction Inc. (GVA, Financial).
Auxier founded his firm in 1998 in Oregon. The firm uses a value-oriented approach to evaluate companies. Auxier likes compelling, undervalued companies that possess strong or improving fundamentals, consistent operating results, a substantial competitive advantage, strong returns on capital and understandable products. He also values honest and shareholder-oriented management teams that have good capital allocation policies.
The investor purchased 35,975 shares of Cerner for an average price of $53.08 per share, giving it 0.4% portfolio space.
Cerner is a health care information technology company headquartered in Kansas City, Missouri. It has a market cap of $18.2 billion; its shares were trading around $55.04 on Wednesday with a price-earnings (P/E) ratio of 29.9, a forward P/E ratio of 22.12, a price-book (P/B) ratio of 4.9 and a price-sales (P/S) ratio of 3.9.
The Peter Lynch chart below shows the stock is trading above its fair value.
GuruFocus ranked Cerner’s financial strength 7 of 10. The Piotroski F-Score of 6 and Altman Z-Score of 9.04 indicate the company is in stable business and financial condition. Since the return on invested capital (ROIC) outperforms the weighted average cost of capital (WACC), the company is creating value as it grows.
The company’s profitability and growth was ranked 9 of 10 by GuruFocus. It has an operating margin of 18.9% and a net margin of 13.3%. The return on equity (ROE) and return on assets (ROA) outperform 75% and 83% of other companies in the global health information services industry. Similarly, the return on capital (ROC) outperforms 61% of competitors. Over the past three years, the company has grown its revenue at a rate of 19.1% per year, its EBITDA at a rate of 20.3% per year and its EPS at a rate of 17.9% per year.
Cerner does not pay a dividend.
Among the gurus invested in Cerner, the Vanguard Health Care Fund (Trades, Portfolio) has the largest position with 5.14% of outstanding shares, which represents 2.1% of its total assets managed. In all, 12 gurus hold the stock.
Auxier bought 13,337 shares of Yum China for an average price of $26.73 per share, expanding the portfolio 0.08%.
Yum China was spun off Yum Brands Inc. (YUM, Financial) in October 2016 to operate KFC and Pizza Hut restaurants in China. It has a market cap of $10.2 billion; its shares were trading around $26.59 on Wednesday with a P/E ratio of 19.6, a forward P/E of 19.8, a P/B ratio of 4.3 and a P/S ratio of 1.5.
The Peter Lynch chart below shows the stock is trading above its fair value.
GuruFocus ranked Yum China’s financial strength 4 of 10. It has a strong Piotroski F-Score of 8 and Altman Z-Score of 4.6, suggesting it has a healthy business and is in good financial condition. Its cash-debt ratio of 34.4 indicates the company is able to cover any outstanding debt with cash on hand.
The company’s profitability and growth was ranked 2 of 10 by GuruFocus. It has an operating margin of 9.5% and a net margin of 7.4%. Its ROE is 23.4%, its ROA is 14.5%, and its ROC is 36.7%.
Yum China does not currently pay a dividend.
Mason Hawkins (Trades, Portfolio) is the largest guru shareholder of Yum China with 2.4% of its outstanding shares, which represents 2.3% of his assets managed. Manning & Napier Advisors Inc., Paul Tudor Jones (Trades, Portfolio) and Ron Baron (Trades, Portfolio) also hold the stock.
After previously selling out of Granite Construction in third-quarter 2013, Auxier established a new stake of 3,700 shares, giving it 0.04% portfolio space. He paid an average price of $53.09 per share.
Founded nearly 100 years ago in California, Granite Construction is a diversified civil contractor and producer of construction materials. It has a market cap of $2.2 billion; its shares were trading around $55.11 on Wednesday with a P/E ratio of 38.9, a forward P/E ratio of 26.4, a P/B ratio of 2.5 and a P/S ratio of 0.88.
The Peter Lynch chart below shows the stock is trading above it fair value.
GuruFocus ranked its financial strength 7 of 10. It has a moderate Piotroski F-Score of 5 and high Altman Z-Score of 4.2, suggesting the company is in stable condition with no financial stress. The ROIC underperforms the WACC so the company is destroying value as it grows. The cash-debt ratio of 2.1 and interest coverage ratio of 7.5 imply the company is able to cover its debt and interest expenses.
GuruFocus ranked Granite Construction’s profitability and growth 6 of 10. It has an operating margin of 3.7% and a net margin of 2.3%. The ROE and ROA outperform 50% and 57% of other companies in the global engineering and construction industry. Similarly, the ROC outperforms 59% of competitors. Over the last three years, the company has grown its revenue at a rate of 2.3% per year and its EBITDA at a rate of 93% per year.
The trailing 12-month dividend yield is 0.97% and the forward dividend yield is 0.95%.
Jim Simons (Trades, Portfolio) is the largest guru shareholder with 0.5% of its outstanding shares, which represents 0.02% of his total assets managed. Steven Cohen (Trades, Portfolio), Jones and Pioneer Investments (Trades, Portfolio) also hold the stock.
Auxier’s current portfolio is composed of 152 stocks and is valued at around $460 million.
Disclosure: I do not own any stocks mentioned in the article.
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