Delphi Management leader Scott Black (Trades, Portfolio) released his first-quarter portfolio on May 14, listing nine new positions.
A disciple of the Graham-Dodd school of value investing, Black’s firm takes long positions in companies that exhibit “a low absolute valuation” that are run by good management teams. According to its website, the Boston-based firm personally contacts the management of every company it invests in.
Among the companies that met these criteria in the most recent quarter were Applied Materials Inc. (AMAT, Financial), Unum Group (UNM, Financial), Blackstone Mortgage Trust Inc. (BXMT, Financial), Norbord Inc. (OSB, Financial) and The E.W. Scripps Co. (SSP, Financial).
Applied Materials
Black invested in 44,197 shares of Applied Materials for an average price of $55.67 per share, giving it 1.5% portfolio space.
The Santa Clara, California-based supplier of semiconductor manufacturing equipment has a market cap of $57.44 billion; its shares were trading around $54.67 on Tuesday with a price-earnings ratio of 20.63, a price-book ratio of 6.77 and a price-sales ratio of 3.81.
The Peter Lynch chart below shows the stock is trading above its fair value, suggesting it is overpriced.
GuruFocus rated Applied Materials’ financial strength 7 out of 10. Not only does the company’s level of interest coverage surpass Benjamin Graham’s standard of 5, but its Altman Z-Score of 6.44 indicates it is in a good financial position. Boosted by an expanding operating margin and high Piotroski F-Score of 8, its profitability and growth was rated 9 of 10. In addition, it has a one-star (out of five) business predictability rating.
Of the gurus invested in Applied Materials, the T Rowe Price Equity Income Fund (Trades, Portfolio) has the largest position with 0.27% of outstanding shares. Additional guru shareholders are Steven Cohen (Trades, Portfolio), David Carlson (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Chris Davis (Trades, Portfolio), Caxton Associates (Trades, Portfolio), Lee Ainslie (Trades, Portfolio) and Ray Dalio (Trades, Portfolio), among others.
Unum Group
Having previously exited a position in Unum Group in the fourth quarter of 2017, the guru established a new 46,036-share holding for an average price of $52.25 per share, expanding the portfolio 1.33%.
The insurance company, which is headquartered in Chattanooga, Tennessee, has a market cap of $8.41 billion; its shares were trading around $38.02 on Tuesday with a price-earnings ratio of 7.99, a price-book ratio of 0.88 and a price-sales ratio of 0.75.
According to the Peter Lynch chart below, the stock is undervalued as it is trading below its fair value.
Unum Group’s financial strength and profitability and growth were both rated 4 out of 10. While it has a low debt-to-equity ratio, its net margin outperforms 69% of competitors. The company also has a two-star business predictability rating.
With 0.93% of outstanding shares, Donald Smith (Trades, Portfolio) is the company’s largest guru shareholder. NWQ Managers (Trades, Portfolio), Pioneer, Ken Fisher (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), Jeff Auxier (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Tom Russo (Trades, Portfolio), Greenblatt and David Dreman (Trades, Portfolio) also own the stock.
Blackstone Mortgage
The investor purchased 69,075 shares of Blackstone Mortgage for an average price of $31.36 per share. The trade had an impact of 1.32% on the portfolio.
The New York-based real estate finance company has a market cap of $3.39 billion; its shares were trading around $31.30 on Tuesday with a price-earnings ratio of 13.67, a price-book ratio of 1.16 and a price-sales ratio of 11.98.
Based on the Peter Lynch chart below, the stock appears to be trading near its fair value.
Weighed down by debt, Blackstone’s financial strength was rated 3 out of 10 by GuruFocus. Its profitability and growth fared much worse, scoring 1 of 10, as its revenue per share has been in a multiyear decline. The company has a one-star business predictability rating.
With his purchase, Black became the company’s largest guru shareholder with 0.06% of outstanding shares. Jones, Murray Stahl (Trades, Portfolio) and Dreman are also shareholders.
Norbord
Black picked up 56,354 shares of Norbord for an average price of $35.72 per share, giving it 1.25% portfolio space.
The Canadian manufacturer of wood-based panels has a market cap of $3.51 billion; its shares were trading around $40.25 on Tuesday with a price-earnings ratio of 7.25, a price-book ratio of 3.18 and a price-sales ratio of 1.52.
The Peter Lynch chart below suggests the stock is undervalued since it is trading below its fair value.
As a result of comfortable interest coverage and a high Altman Z-Score of 4.29, GuruFocus rated Norbord’s financial strength 7 out of 10. Its profitability and growth was rated 8 of 10 because of its expanding operating margin and strong Piotroski F-Score of 8. It also has a one-star business predictability rating.
With his purchase of 0.07% of the company’s outstanding shares, Black became its largest guru shareholder. Greenblatt also holds the stock.
E.W. Scripps
Black invested in 151,963 shares of E.W. Scripps for an average price of $14.58 per share, expanding the portfolio 1.11%.
Headquartered in Cincinnati, the broadcasting company has a market cap of $1.03 billion; its shares were trading around $12.63 on Tuesday with a forward price-earnings ratio of 14.79, a price-book ratio of 1.14 and a price-sales ratio of 1.14.
According to the Peter Lynch chart below, the stock is overpriced as it is trading higher than its fair value.
GuruFocus rated E.W. Scripps’ financial strength 5 out of 10. Not only does the company have a low level of interest coverage, its Altman Z-Score of 1.07 indicates the possibility of bankruptcy in the next couple years. Its profitability and growth scored a 4 of 10 rating as its operating margin underperforms 67% of competitors. The company also has a moderate Piotroski F-Score of 4 and a one-star business predictability rating.
Mario Gabelli (Trades, Portfolio) is the company’s largest guru shareholder with 10.19% of outstanding shares. Chuck Royce (Trades, Portfolio) and Stahl are also shareholders.
Other trades
During the quarter, Black also established positions in Celgene Corp. (CELG, Financial), Noble Energy Inc. (NBL, Financial), BAE Systems PLC (BAESY, Financial) and Century Bancorp Inc. (CNBKA, Financial).
The portfolio of 82 holdings is largely invested in the consumer cyclical and technology sectors.
Disclosure: No positions.
