Andreas Halvorsen (Trades, Portfolio), founder of Viking Global Investors, disclosed he established a 5.44% stake in The Middleby Corp. (MIDD, Financial) on June 16.
With heavy emphasis on research and a long-term focus, the Greenwich, Connecticut-based hedge fund, which has $25 million in assets under management, picks stocks based on its understanding of a company’s business fundamentals, management team and cyclical and secular industry trends.
According to GuruFocus real-time picks, Halvorsen invested in 3.03 million shares of Middleby for an average price of $104.50 per share, giving the position 1.87% portfolio space.
The Elgin, Illinois-based manufacturer of foodservice equipment has a market cap of $5.87 billion; its shares were trading around $105.40 on Tuesday with a price-earnings ratio of 20.30, a price-book ratio of 4.09 and a price-sales ratio of 2.46.
The Peter Lynch chart below shows the stock is trading higher than its fair value, suggesting it is overpriced.
GuruFocus estimates the stock has fallen approximately 22% year to date, however.
In early May, Middleby reported first-quarter earnings of $1.18 per share on $584.8 million in revenue, missing analyst estimates on both fronts.
Later that month, the company announced it is acquiring Taylor Co. from UTC Climate, Controls & Security, a unit of United Technologies (UTX, Financial), for $1 billion. So far this year, it has acquired five other companies.
Middleby’s financial strength was rated 6 out of 10 by GuruFocus. While the company has issued approximately $381.9 million in new long-term debt over the past three years, it is still at a manageable level. In addition, the Altman Z-Score of 3.75 indicates the company is in good financial standing.
The company’s profitability and growth scored an 8 out of 10 rating, supported by an expanding operating margin, which outperforms 88% of its industry peers, and a moderate Piotroski F-Score of 5, which implies it has stable business operations.
It also has a business predictability ranking of 4.5 out of five stars. According to GuruFocus, companies that receive this coveted rating see an average gain of 10.6% per year.
With his purchase, Halvorsen became Middleby’s largest shareholder among the gurus. Ron Baron (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Columbia Wanger (Trades, Portfolio), Pioneer Investments (Trades, Portfolio) and Mario Gabelli (Trades, Portfolio) are also invested in the company.
Halvorsen’s portfolio, which is composed of 59 holdings, is largely invested in the technology sector, followed by financial services and health care. In 2017, he was ranked as the eighth highest-earning fund manager in the world, recording $26 billion in net gains since inception.
Disclosure: No positions.
