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James Li
James Li
Articles (325)  | Author's Website |

Bill Nygren Added Charter Communications in 2nd Quarter

Fund manager also trimmed 3 other positions

September 12, 2017 | About:

Oakmark Fund manager Bill Nygren (Trades, Portfolio) invests in companies that trade at a significant discount to the expected intrinsic value. During the second quarter, Nygren invested in Charter Communications Inc. (NASDAQ:CHTR) and trimmed his positions in Anadarko Petroleum Corp. (NYSE:APC), Microsoft Corp. (NASDAQ:MSFT) and AutoNation Inc. (NYSE:AN).

Charter Communications

Nygren invested in 481,000 shares of Charter Communications for an average price of $333.61 per share. The fund manager increased his portfolio 0.96% with this transaction.

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Charter Communications has good profitability albeit poor financial strength. The Connecticut-based cable company’s Altman Z-score of 0.88 implies bankruptcy within the next 48 months. Despite this, Charter’s operating and net margins are near a 10-year high and outperform over 60% of global pay TV companies.

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Charter CEO Tom Rutledge said the company now offers “a simple, high value product” under one brand, Spectrum. Rutledge mentioned Spectrum continues to deliver “higher year-over-year customer-connect volumes” across Charter’s new footprint. Spectrum’s success contributed to the company’s high margins and returns, suggesting good short-term growth potential.

Guru trimmed three positions

The Oakmark fund manager trimmed one-third of his stake in Anadarko, selling 1.7 million shares for an average price of $53.15 per share. Nygren also sold 950,000 shares of Microsoft for an average price of $68.61 per share and 1.468 million shares of AutoNation for an average price of $40.65 per share.

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Texas-based Anadarko has a modest profitability rank of 5. The energy exploration and production company’s profit margins contracted over the past five years as crude oil prices declined from a five-year high of $100 per barrel to its current value of $48 per barrel.

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Although Microsoft’s profit margins outperform about 90% of global competitors, the software company’s operating margin and gross margin have contracted 6.9% and 4.6% per year over the past five years. Additionally, Microsoft’s gross margin is currently near a 10-year low of 61.58%.

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Fort Lauderdale, Florida-based AutoNation reported a 2% year-over-year decline in same-store combined retail vehicle sales during the second quarter primarily due to challenging market conditions in Texas and Florida and “implementation challenges with [the company’s] One Price strategy” according to CEO Mike Jackson. The decline in revenues contributed to poor operating margins, which currently underperform about 61% of global competitors.

As the company exhibits declining growth potential, Steven Cohen (Trades, Portfolio) and David Dreman (Trades, Portfolio) eliminated AutoNation from their portfolios.

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See also

On Sept. 8, GuruFocus introduced a new way to retrieve guru portfolio information from the Excel Add-in: GURUG. This user-defined Excel function complements the GURUF function that retrieves company financial data.

Disclosure: I do not have positions in the stocks mentioned.

About the author:

James Li
I am an editorial assistant and researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

Visit James Li's Website


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