 Lou Simpson (Trades, Portfolio), Warren Buffett (Trades, Portfolio)’s former chief investment officer, added to his positions in Liberty Global PLC (LBTYK, Financial), Hexcel Corp. (HXL, Financial) and Sensata Technologies Holding N.V. (ST, Financial) during the second quarter. The SQ Advisors LLC manager also trimmed his positions in AMETEK Inc. (AME, Financial), Berkshire Hathaway Inc. (BRK.B, Financial) and Charles Schwab Corp. (SCHW, Financial).
Liberty Global
Simpson increased his Liberty Global position 15.57%, investing in 1,319,888 shares for an average price of $31.17 per share. The guru increased his portfolio 1.5% with this transaction.
Liberty Global, an international TV and broadband holding company, has a profitability rank of 6. The company’s Piotroski F-score of 7 implies good business operations, which usually results in good growth potential. Liberty Global’s operating margins outperform about 70% of global pay TV companies even though the margins contracted from 2013 to 2015.
Simpson owns 9,797,776 shares of Liberty Global, the fourth-largest stake in the company among gurus.
Hexcel
The SQ Advisors manager added 707,803 shares of Hexcel for an average price of $51.66 per share, increasing the position 36.07%. With this transaction, Simpson expanded his portfolio 1.36%.
Hexcel manufactures composites for use in commercial aerospace, defense and other industrial markets. The company reported net sales of $491.3 million, driven on “continued strong execution and cost control” according to CEO Nick Stanage.
Hexcel’s profitability ranks a solid 8 as the company has expanding operating margins and returns on equity that outperform over 82% of global competitors. Stanage expects “strong execution and cost control” should offset declining sales, allowing Hexcel to achieve its full-year adjusted earnings guidance.
Sensata Technologies
Simpson boosted his Sensata position 16.59%, adding 515,337 shares for an average price of $41.07 per share. The guru increased his portfolio 0.8% with this transaction.
Sensata Technologies, an industrial technology company, produces controls for applications in automotive systems and thermal circuit breakers in aircraft. The company has a profitability rank of 8, with operating margins and returns on equity outperforming over 80% of global competitors.
Sensata CEO Martha Sullivan said “double-digit organic revenue growth in [the company’s] heavy vehicle and off road business” contributed to strong organic revenue growth and margin expansion during the quarter. The company’s three-year revenue growth rate of 19.10% outperforms 88% of global competitors.
AMETEK
Simpson axed 26.55% of his stake in AMETEK, selling 921,765 shares for an average price of $58.98 per share. With this transaction, the guru pared 1.9% of his portfolio.
While the company has strong profit margins, AMETEK is significantly overvalued. The diversified industrials company’s price-sales ratio is near a 10-year high of 3.75 while its price-book ratio is near a 10-year high of 4.43. Additionally, AMETEK trades near its 10-year maximum price-sales valuation.
Berkshire Hathaway
Simpson sold 147,386 shares of Buffett’s conglomerate for an average price of $166.27 per share. With this transaction, the SQ Advisors fund manager trimmed 0.94% of his portfolio.
Buffett mentioned Berkshire’s insurance business generated “after-tax losses from underwriting” in the latest quarter according to his quarterly report filing with the SEC. The conglomerate has a three-year revenue growth rate of 7.10% per year, about 50% lower than the median growth rate of 14.35% per year.
Charles Schwab
Simpson sold 85,833 shares of Charles Schwab for an average price of $39.99 per share. With this transaction, the guru trimmed 0.13% from his portfolio.
Charles Schwab, a San Francisco-based brokerage company, trades near a 10-year high despite having strong operating margins. The company’s share price trades near its 10-year maximum price-sales valuation of $46.
Disclosure: The author has no positions in the stocks mentioned.
