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. (CHTR, Financial) and trimmed his positions in Anadarko Petroleum Corp. (APC, Financial), Microsoft Corp. (MSFT, Financial) and AutoNation Inc. (AN, Financial).
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.
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.
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.
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.
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%.
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.
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.
