Spiros Segalas (Trades, Portfolio), portfolio manager of the Harbor Capital Appreciation Fund, released his first-quarter portfolio on Tuesday, disclosing he established five new positions.
With the goal of investment growth, the fund invests in companies with strong balance sheets and earnings performance, a strong outlook for sales growth, a history of high profitability and good management.
In the first quarter, the guru purchased Schlumberger Ltd. (SLB, Financial), Walmart Inc. (WMT, Financial), PNC Financial Services Group Inc. (PNC, Financial), Square Inc. (SQ, Financial) and IDEXX Laboratories Inc. (IDXX, Financial).
Schlumberger
Having previously exited a position in Schlumberger in the second quarter of 2017, Segalas established a new 3.18 million-share stake, giving it 0.74% portfolio space. He paid an average price of $68.16 per share.
The Houston-based oilfield services company has a market cap of $88.22 billion; its shares were trading around $63.65 on Wednesday with a forward price-earnings ratio of 30.12, a price-book ratio of 2.39 and a price-sales ratio of 2.91.
The Peter Lynch chart below shows the stock is trading higher than its fair value, suggesting it is overpriced.
GuruFocus rated both Schlumberger’s financial strength and profitability and growth 5 out of 10. The company’s interest coverage does not meet Benjamin Graham’s standard of 5 and its Altman Z-Score suggests it has some financial issues. While its operating margin outperforms 75% of competitors, it has been declining for the past five years. The company has a strong Piotroski F-Score of 6, however, and a one-star business predictability rating (out of five).
Of the gurus invested in Schlumberger, Dodge & Cox has the largest holding with 3.55% of outstanding shares. Other top guru shareholders include First Eagle Investment (Trades, Portfolio), Manning & Napier Advisors Inc., PRIMECAP Management (Trades, Portfolio), Mairs and Power (Trades, Portfolio) and David Rolfe (Trades, Portfolio).
Walmart
Segalas invested in 2.04 million shares of Walmart for an average price of $98.16 per share, expanding the portfolio 0.69%.
The Bentonville, Arkansas-based retailer has a market cap of $252.58 billion; its shares were trading around $85.60 on Wednesday with a price-earnings ratio of 26.17, a price-book ratio of 3.24 and a price-sales ratio of 0.51.
According to the Peter Lynch chart below, the stock is overpriced as it is trading above its fair value.
Walmart’s financial strength and profitability and growth were both ranked 6 out of 10 by GuruFocus. The company’s interest coverage meets Graham’s minimum and its Altman Z-Score of 4.40 indicates the company is financially stable. In addition, the retailer’s operating margin is expanding and outperforms 63% of competitors. The company also has a strong Piotroski F-Score of 6 and a one-star business predictability rating.
With 0.39% of outstanding shares, Bill Gates (Trades, Portfolio) is the company’s largest guru shareholder. Ken Fisher (Trades, Portfolio), Richard Pzena (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Jim Simons (Trades, Portfolio), Warren Buffett (Trades, Portfolio) and several other gurus also own the stock.
PNC Financial
The guru purchased 1.12 million shares of PNC Financial for an average price of $143.85 per share. The trade had an impact of 0.56% on the portfolio.
The Pittsburgh-based bank holding company has a market cap of $70.2 billion; its shares were trading around $148.85 on Wednesday with a price-earnings ratio of 14.35, a price-book ratio of 1.48 and a price-sales ratio of 4.42.
Based on the Peter Lynch chart below, the stock appears to be trading slightly below its fair value.
Since PNC has issued a lot of new debt over the past three years, GuruFocus rated its financial strength 4 out of 10. Its profitability and growth was rated 5 of 10 as its operating margin is expanding. In addition, the company has a two-star business predictability rating.
Barrow, Hanley, Mewhinney & Strauss is the company’s largest guru shareholder with 0.47% of outstanding shares. Diamond Hill Capital (Trades, Portfolio), the T Rowe Price Equity Income Fund (Trades, Portfolio), Pioneer Investments and Mario Gabelli (Trades, Portfolio), among others, are also shareholders.
Square
Segalas bought 3.6 million shares of Square for an average price of $39.96 per share, giving it 0.54% portfolio space.
The San Francisco-based financial services company, which facilitates mobile payments, has a market cap of $18 billion; its shares were trading around $45.41 on Wednesday with a price-earnings ratio of 105.26, a price-book ratio of 22.82 and a price-sales ratio of 7.78.
While there is not enough data to determine the company’s valuation based on Lynch’s standards, the median price-sales chart shows the stock is trading above its historical average.
GuruFocus rated Square’s financial strength 6 of 10 because of its strong Altman Z-Score of 9.18. Its profitability and growth was rated 4 of 10. Although its operating margin is expanding, it still underperforms 68% of competitors. The company also has a moderate Piotroski F-Score of 5, indicating it is stable.
With 0.19% of outstanding shares, Simons is the company’s largest guru shareholder. Other shareholders are Steven Cohen (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Pioneer Investments, Chuck Royce (Trades, Portfolio) and First Eagle Investment.
IDEXX Laboratories
The guru’s final new purchase for the quarter was 245,960 shares of IDEXX Laboratories for an average price of $162.40 per share, expanding the portfolio 0.15%.
The Westbrook, Maine-based veterinary diagnostics company has a market cap of $16.43 billion; its shares were trading around $187.66 on Wednesday with a price-earnings ratio of 63.83 and a price-sales ratio of 8.53.
According to the Peter Lynch chart below, the stock is expensive as it is trading well above its fair value.
IDEXX’s financial strength was rated 5 out of 10 by GuruFocus. Although the company has been issuing new long-term debt over the past several years, it is still at a manageable level. In addition, the Altman Z-Score of 8.17 suggests it is financially strong. The company’s profitability and growth was rated a perfect 10, boosted by expanding operating margins, a high Piotroski F-Score of 9 and a five-star business predictability rating.
Of the gurus invested in IDEXX, Ron Baron (Trades, Portfolio) has the largest holding with 5.4% of outstanding shares. Simons, Royce, Columbia Wanger (Trades, Portfolio), Cohen, Pioneer Investments, Jones, Joel Greenblatt (Trades, Portfolio), Mairs and Power (Trades, Portfolio), Ruane Cunniff (Trades, Portfolio) and George Soros (Trades, Portfolio) are also shareholders.
Other trades
During the quarter, Segalas added to many of his other holdings, including Costco Wholesale Corp. (COST, Financial), The Home Depot Inc. (HD, Financial), The Estee Lauder Companies Inc. (EL, Financial), FedEx Corp. (FDX, Financial) and Kering SA (XPAR:KER, Financial).
The current portfolio of 55 holdings is largely composed of stocks in the technology sector. According to its fact sheet, the fund outperformed the S&P 500 Index in 2017 with a return of 36.59%. The index returned 21.83%.
Disclosure: No positions.
