Jana Partners' (Trades, Portfolio) new buys include three top performers and a Massachusetts software entity whose subsidiaries drew millions of dollars in bribery-related penalties from regulators two years ago.
Out of a total of 12 new stocks, the New York-based Jana Partners (Trades, Portfolio) initiated new positions in solid performers, such as aerospace giant Northrop Grumman (NOC, Financial) and media company, Comcast Corp. (CMCSA, Financial).
Jana’s top new buy, representing 2.28% of portfolio space, was Massachusetts-based software company, PTC Inc. (PTC, Financial). PTC was targeted by regulators after accusations that it was bribing Chinese officials in order to drum up business. In 2016, the Securities and Exchange Commission found two Chinese subsidiaries of PTC provided non-business related travel and other improper payments to various Chinese government officials in efforts to win business. As a result, PTC agreed to pay $11.9 billion in disgorgement and $1.76 million in prejudgment interest to settle the charges. Its two Chinese subsidiaries also agreed to pay a $14 million fine in a non-prosecution agreement as part of a deal with the U.S. Department of Justice.
In early Monday trading, PTC stock was rising at $80 dollars a share.
Jana grabbed headlines early in the year when it spearheaded a letter with CalSTRS, the retirement system dedicated to public school educators in California, to Apple Inc., expressing its concerns over cell phone usage on the development of young people.
The iPhone maker responded in a statement saying it provided parental controls to limit exposure, as well as other applications that the company says address most of the concerns Jana raised in the letter.
Jana strategy
Jana’s portfolio in the fourth quarter is valued at $3.78 billion. The company specializes in identifying undervalued companies that have one or more specific catalysts to unlock value. It takes long and short positions.
Barry Rosenstein, managing partner and co-portfolio manager, founded the company in 2001. Rosenstein sometimes likes to take an activist role in his investment dealings, such as in the case involving iPhones and Apple.
In the fourth quarter, the new stock buys make up almost 10% of the portfolio.
Jana's top holdings, on the other hand, make up roughly 52% of the portfolio.The stock of natural gas producer EQT Corp. leads the pack, holding more than 14% of the portfolio. In second place is Zimmer Biomet Holdings Inc. (ZBH), at about 12%. The company provides medical devices, such as orthopedic reconstructive implants, as well as supplies and surgical equipment for orthopedic surgery.
Tiffany & Co. (TIF, Financial), a mono-brand jeweler that sells timepieces, sterling silver goods, china, crystal and accessories, sits in 10% of the portfolio.
HD Supply Holdings (HDS, Financial), represents 9.62% of the portfolio. The company is an industrial distributor of projects. It operates in different sectors, including maintenance, repair and operations.
First Data Corp. (FDC, Financial), which provides e-commerce solutions for merchants, takes up 5.87% of the portfolio.
PTC
Jana purchased a total of 1.4 million shares of PTC for an average price of $62 a share in the fourth quarter. The shares sit in about 2.28% portfolio space. The investment has earned 30% since shares were purchased during the final months of the year.
Guru Joel Greenblatt (Trades, Portfolio) also bought shares of the company for the first time in the final months of the year.
PTC has a market cap of $9.3 billion.
It has a price-earnings ratio of 322.48. It has a price-book ratio of 10.54 versus an industry median of 3.13. PTC has a price-sales ratio of 7.99 versus an industry median of 2.45. It has a three-year dividend buyback ratio of -0.20 versus an industry median of -3.20 Its Shiller PE ratio is 180.78 compared to the median in the industry of 39.15.
The Peter Lynch chart suggests the stock is overvalued because it is trading above fair market value.
Comcast Corp.
A total of 2.1 million shares of Comcast fill up 2.26% portfolio space. Shares in the fourth quarter sold for about $37.59 a share.
The Philadelphia-based company has a market cap of $171 billion.
Comcast has a price-earnings ratio of 7.78 versus an industry median of 18.67. It has a price-book ratio of 2.51 versus an industry median of 2.07. Comcast has a price-sales ratio of 2.09 versus an industry median of 1.54.
GuruFocus rates its financial strength 5 in 10 and 8 in 10 in profitability and growth.
Its Business Predictability Ranking is a four-star, signifying an average gain of 9.8% a year. In the last three years, Comcast stock has risen by 26%.
Its annual rate of revenue growth per share is $7.10 over 12 months and $9.50 over five-years.
Northrop Grumman
Los Angeles-based Grumman fills up 2.24% of the portfolio. There are over 270,000 shares in the space. The average share price was $349 a share.
The company has a market cap of $60 billion.
Grumman has a price-earnings ratio of 30.49 versus an industry median of 24.72 and a price-book ratio of 8.63 versus an industry median of 2.20. Grumman has a price-sales ratio of 2.40 versus an industry median of 1.37.
It has a Business Predictability Ranking of two-stars, signaling an average gain in stock price of 6% a year.
GuruFocus ranks it 6 in 10 in financial strength and 7 in 10 in profitability and growth. Its annual rate of revenue growth per share over the last 12 months was 8.2%. Over the last five years, that number is 8.30%.
Its stock has risen by 44% in the last 12 months.
The company announced last September that it was acquiring Virginia-based Orbital ATK for $9.2 billion. It said the deal would produce a cost savings of $150 million.
The Peter Lynch chart suggests it is trading above its fair share value, which could mean that the stock is overvalued.
Jana also bought over 827,000 shares of Facebook Inc. (FB), for an average price of $185.11 a share. Shares sit in about 2.21% of the portfolio.
The social media giant has a market cap of $537 billion. It has a price-earnings ratio of 34.22 versus an industry median of 30.40. It has a price-book ratio of 7.23 versus an industry median of 3.43. Facebook has a price-sales ratio of 13.45 versus an industry media of 2.48. It has no debt. Its rate of revenue growth per share over five years is 42%. It posted diluted earnings per share of $5.39 over a trailing 12-month period.
GuruFocus identified one severe earning sign, which signifies the company’s growth in assets is on a faster pace than its revenue growth. This could signal the company is becoming less efficient.
GuruFocus rates it a 10 out of 10 in financial strength and 9 of 10 in profitability and growth.
In the fourth quarter, only George Soros (Trades, Portfolio) exited his position in Facebook, while more than two dozen gurus held shares in the hundreds of thousands in their portfolios.
The Peter Lynch chart suggests the stock price is overvalued. The median is around $80 a share.
