Robert Bruce (Trades, Portfolio)’s Bruce Fund gained three new positions during the second quarter and exited two others.
Managing a fairly concentrated portfolio of 38 holdings, Bruce and his son Jeff mostly invest in the utilities and health care sectors. The current portfolio is valued at $388 milllion.
The three companies the fund initiated stakes in during the quarter were Valeant Pharmaceuticals International Inc. (VRX, Financial), Valvoline Inc. (VVV, Financial) and Synergy Pharmaceuticals Inc. (SGYP, Financial).
Valeant Pharmaceuticals
In the largest trade of the quarter, Bruce purchased 581,000 shares of Valeant for an average price of $11.96 per share, giving it 2.59% portfolio space.
The pharmaceutical company, which is recovering from legal woes, has a market cap of $4.8 billion; its shares were trading around $13.75 on Thursday with a forward price-earnings (P/E) ratio of 3.89, a price-book (P/B) ratio of 1.18 and a price-sales (P/S) ratio of 0.51.
The Peter Lynch chart below suggests the stock is trading below its fair value.
The company reported its second-quarter earnings on Aug. 8, beating earnings expectations but lowering its revenue guidance for the year. GuruFocus ranked the company’s financial strength 3 of 10 and its profitability and growth 7 of 10.
The company does not currently pay a dividend.
John Paulson (Trades, Portfolio) is Valeant’s largest guru shareholder with 5.98% of outstanding shares. A total of eight other gurus also hold the stock.
Valvoline
Bruce bought 68,633 shares of Valvoline for an average price of $23.14 per share, expanding the portfolio 0.42%.
The chemical industrial company, which produces motor oil and other automotive lubricants, has a market cap of $4.49 billion; its shares were trading around $22.14 on Thursday with a P/E ratio of 17.16 and a P/S ratio of 2.23.
According to the Peter Lynch chart below, the stock is trading above its fair value.
The company reported its second-quarter results on Aug. 1, posting adjusted EPS of 34 cents and net income of $56 million. It saw system-wide same-store sales grow 7.9% from the comparable quarter of 2016. GuruFocus ranked Valvoline’s financial strength 5 of 10 and its profitability and growth 4 of 10.
The company’s trailing dividend yield is 0.66% and its forward dividend yield is 0.88%. The dividend payout ratio is 11%.
With 1.08% of outstanding shares, Mario Gabelli (Trades, Portfolio) is the company’s largest shareholder among the gurus. Leon Cooperman (Trades, Portfolio) and Jim Simons (Trades, Portfolio) are also shareholders.
Synergy Pharmaceuticals
Bruce initiated a 100,000-share stake in Synergy Pharmaceuticals, paying an average price of $4.11 per share. The trade had an impact of 0.11% on the portfolio.
The pharmaceutical company has a market cap of $690.59 million; its shares were trading around $3.07 on Thursday with a P/B ratio of 6.60.
Based on the Peter Lynch chart below, the stock appears to be trading below its fair value.
The company, which specializes in treatments for gastrointestinal diseases like irritable bowel syndrome, reported its second quarter on Aug. 9. It posted a loss of 33 cents per share, wider than the expected loss of 25 cents, on net sales of $2.3 million. GuruFocus ranked the company’s financial strength 5 of 10 and its profitability and growth 4 of 10.
The company does not currently pay a dividend.
With 10.7% of outstanding shares, Paulson is the company’s largest guru shareholder. Louis Moore Bacon (Trades, Portfolio) and Simons are also shareholders.
The fund sold its stakes in US Ecology Inc. (ECOL, Financial) and Titan International Inc. (TWI, Financial) during the quarter.
US Ecology
Having established the position in first-quarter 2011, Bruce sold the remaining 15,300 shares of US Ecology for $49.51 per share. The trade had an impact of -0.19% on the portfolio.
The waste management company has a market cap of $1.06 billion; its shares were trading around $48.55 on Thursday with a P/E ratio of 37.92, a P/B ratio of 3.7 and a P/S ratio of 2.24.
The Peter Lynch chart below shows the stock is trading well above its fair value.
The company reported its second-quarter earnings on July 27, posting revenue of $126.1 million and adjusted EPS of 38 cents. These figures increased 3% and 2.7% year over year, reflecting improving business conditions. GuruFocus ranked the company’s financial strength 5 of 10 and its profitability and growth 8 of 10.
The company’s trailing dividend yield is 1.43% and its forward dividend yield is 1.4%. The dividend payout ratio is 56%.
Simons is the only guru invested in the company. He holds 0.87% of outstanding shares.
Titan International
Bruce sold the remaining 43,436 shares of Titan International for an average price of $10.78 per share, impacting the portfolio -0.12%. The initial holding was established in the first quarter of 2011.
The wheel and tire manufacturer has a market cap of $581.49 million; its shares were trading around $9.74 on Thursday with a P/B ratio of 1.62 and a P/S ratio of 0.45.
The Peter Lynch chart below indicates the stock is trading above its fair value.
The company reported its second-quarter earnings on Aug. 3, posting net sales of $364.4 million, up 10% year over year. Earnings loss of 17 cents per share was negatively affected by a $5.3 million currency exchange loss. GuruFocus ranked the company’s financial strength 4 of 10 and its profitability and growth 4 of 10.
The company’s trailing dividend yield and forward dividend yield are both 0.2%.
With 4.17% of outstanding shares, Simons is the company’s largest guru shareholder. Chuck Royce (Trades, Portfolio) also owns the stock.
During the quarter, the fund also added to its position in General Motors Co. (GM, Financial) and reduced its Bunge Ltd. (BG, Financial), Supernus Pharmaceutical Inc. (SUPN, Financial) and Amerco Inc. (UHAL, Financial) stakes.
Disclosure: I do not own any stocks mentioned.
