Bill Nygren (Trades, Portfolio), manager of the Oakmark Fund, released his first-quarter portfolio this week, listing four new holdings.
Nygren, who also manages Oakmark’s Select Fund and Global Select Fund, invests in mid- and large-cap companies to achieve capital appreciation. When picking stocks, he looks for growing companies that have shareholder-oriented management teams. He will take a position when the stock is trading at a substantial discount to his estimate of intrinsic value.
The companies that met these criteria in the most recent quarter were Regeneron Pharmaceuticals Inc. (REGN, Financial), Flex Ltd. (FLEX, Financial), Facebook Inc. (FB, Financial) and Alphabet Inc. (GOOGL, Financial).
Regeneron Pharmaceuticals
The guru invested in 744,000 shares of Regeneron for an average price of $347.81 per share, giving the position 1.38% portfolio space.
The Tarrytown, New York-based biotechnology company has a market cap of $33.29 billion; its shares were trading around $308.65 on Friday with a price-earnings ratio of 25.04, a price-book ratio of 5.06 and a price-sales ratio of 5.88.
The Peter Lynch chart below shows the stock is trading higher than its fair value, suggesting it is overpriced.
Regeneron’s financial strength and profitability and growth were both rated 8 out of 10 by GuruFocus. Not only does the company have a comfortable level of interest coverage, but its Altaman Z-Score of 9.28 indicates it is financially strong. While its operating margin has declined in recent years, the company has a high Piotroski F-Score of 7 and a business predictability rating of one star out of five.
Of the gurus invested in Regeneron, the Vanguard Health Care Fund (Trades, Portfolio) has the largest holding with 2.82% of outstanding shares. During the quarter, Ray Dalio (Trades, Portfolio)’s Bridgewater Associates, Leucadia National (Trades, Portfolio) and Caxton Associates (Trades, Portfolio) also established positions. Frank Sands (Trades, Portfolio), Jim Simons (Trades, Portfolio), Manning & Napier Advisors Inc., Steven Cohen (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), the Eaton Vance Worldwide Health Sciences Fund (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio) and Ken Fisher (Trades, Portfolio) are also shareholders.
Flex
Nygren started a 12 million-share stake in Flex for an average price of $18.11 per share, expanding the portfolio 1.06%.
The electronics manufacturing services company, which is headquartered in Singapore, has a market cap of $7.37 billion; its shares were trading around $13.96 on Friday with a price-earnings ratio of 17.69, a price-book ratio of 2.42 and a price-sales ratio of 0.29.
According to the Peter Lynch chart below, the stock is trading close to its fair value.
Both Flex’s financial strength and profitability and growth were rated 6 out of 10 by GuruFocus. Supported by a low level of interest coverage, the company’s Altman Z-Score of 2.59 indicates it is under minor financial stress. Despite the fact the operating margin has been expanding over the past several years, it still underperforms 63% of competitors. The company does benefit, however, from a high Piotroski F-Score of 7 and a one-star business predictability rating.
With 10.1% of outstanding shares, PRIMECAP Management (Trades, Portfolio) is the company’s largest guru shareholder. Cohen also established a position in the first quarter. Other gurus who hold the stock are Larry Robbins (Trades, Portfolio), Richard Pzena (Trades, Portfolio), NWQ Managers (Trades, Portfolio), Pioneer Investments and Dreman.
The investor picked up 1.2 million shares of Facebook for an average price of $179.55 per share, allocating 1.03% of the portfolio to the holding.
Based in California, the social media giant has a market cap of $561.04 billion; its shares were trading around $193.82 on Friday with a price-earnings ratio of 32.10, a price-book ratio of 7.26 and a price-sales ratio of 12.83.
Based on the Peter Lynch chart below, the stock appears to be overpriced since it is trading above its fair value.
Boosted by no debt and a strong Altman Z-Score, Facebook’s financial strength was rated 9 out of 10 by GuruFocus. Its profitability and growth received an 8 out of 10 rating, strengthened by an expanding operating margin, which outperforms the majority of its peers, and a moderate Piotroski F-Score of 6.
Sands is the company’s largest shareholder among the gurus with 0.35% of outstanding shares. Andreas Halvorsen (Trades, Portfolio), Steve Mandel (Trades, Portfolio), David Tepper (Trades, Portfolio), Spiros Segalas (Trades, Portfolio), Chase Coleman (Trades, Portfolio), Daniel Loeb (Trades, Portfolio), Chris Davis (Trades, Portfolio), Lee Ainslie (Trades, Portfolio) and many other gurus also own the stock.
Alphabet
Having previously closed a position in Alphabet in the third quarter of 2016, Nygren initiated a new holding of 93,000 Class A shares for an average price of $1,108.89 per share. The trade had an impact of 0.52% on the portfolio.
The California-based internet company, which is the parent company of Google and YouTube, has a market cap of $783.32 billion; its shares were trading around $1,132.92 on Friday with a price-earnings ratio of 48.16, a price-book ratio of 4.91 and a price-sales ratio of 6.79.
The Peter Lynch chart below suggests the stock is significantly overpriced as it is trading well above its fair value.
GuruFocus rated Alphabet’s financial strength 9 out of 10, driven by good interest coverage and a high Altman Z-Score. Its profitability and growth scored an 8 of 10 rating. Although the company’s operating margin has declined over the past several years, it still outperforms 85% of competitors. In addition, the company has a moderate Piotroski F-Score of 5 and a three-star business predictability rating.
With 0.33% of outstanding shares, Primecap is the company’s largest shareholder among the gurus. Other major guru shareholders include Sands, Fisher, Halvorsen, Ruane Cunniff (Trades, Portfolio), Pioneer, Davis, Segalas, Loeb and Diamond Hill Capital (Trades, Portfolio).
Other trades
During the quarter, Nygren also boosted his positions in American Airlines Group Inc. (AAL, Financial), CVS Health Corp. (CVS, Financial), Comcast Corp. (CMCSA, Financial), General Electric Co. (GE, Financial), Moody’s Corp. (MCO, Financial), Anadarko Petroleum Corp. (APC, Financial), National Oilwell Varco Inc. (NOV, Financial) and Unilever PLC (UL).
The $19.4 billion portfolio, which is composed of 55 holdings, is largely invested in the financial services sector. According to GuruFocus, the fund slightly underperformed the S&P 500 Index in 2017 with a return of 21.14%. The index posted a 21.71% return.
Disclosure: No positions.
