Tiger Management's Portfolio of Undervalued Stocks

The firm opened positions in three stocks with attractive price-earnings ratios in recent quarters

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Yamil Berard
Aug 03, 2018
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Founded by legendary investor 

Julian Robertson (Trades, Portfolio), Tiger Management's $780 million portfolio of 96 stocks included three undervalued equities of companies that pack double-digit discounts, GuruFocus estimates showed.

The firm’s holdings in companies that have been identified as undervalued by GuruFocus are fairly recent. Each pick has a price-earnings ratio that is attractive to value investors. At least one pick has an industry-leading dividend of more than 7%.

One of Tiger's most lucrative holdings, which is selling at a discount of 31%, is that of the pizza delivery and carryout franchise Papa John’s International Inc. (

PZZA, Financial) The company is a mega-earner based on GuruFocus’ five-star business predictability ranking, which is bestowed on stocks with a long-term return of 12% per year. Papa John’s closed at $42.36 a share on Thursday.

Women’s intimate apparel and beauty retailer L Brands Inc. (

LB, Financial), which closed on Thursday at $32 a share, was also in the guru’s corner of undervalued stocks. It traded at a discount rate of about 49%. The stock has received 3.5 stars on GuruFocus’ business predictability rankings.

But the best value stock in the firm’s portfolio is the stock of Southwest Airlines Co. (

LUV, Financial). At a price of about $172 a share, the stock sold at a discount rate of 67%.

Now retired, Robertson is best known for launching Tiger Management in 1980 with $8 million. He turned it into over $22 billion in the late 1990s. It is reported that the compound rate of return to his investors was 32%. During his active years, he was considered the “Wizard of Wall Street” and mentor to a number of young hedge fund managers, known as "Tiger Cubs," who became wildly successful.

The fund is largely made up of Robertson’s own money. A total of 29% of the fund is invested in technology while its other most weighted positions are in the consumer cyclical and financial services industry.

Papa John’s International Inc.

The firm holds 48,600 shares of the Kentucky-based company. It purchased the stock for the first time in the fourth quarter of 2017. The first purchase was for 15,000 shares for an average price of $62.29 a share. Shares sit in about 0.36% of the equity portfolio.

In the first quarter of the year, Tiger Management increased its holding by 224%. The young investment has returned an estimated loss of 30% so far.

The GuruFocus median price-sales chart showed the stock traded below its historical value on Friday.

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It is trading at 16 times price-earnings, which is ranked higher than 64% of more than 230 companies in the Global Restaurant Industry. It has a price-sales ratio of 0.85. The company pays a dividend yield of 2.14%, which is ranked higher than 50% of more than 300 peers.

Papa John’s has produced an annual earnings growth of 13.9% a year over the last decade. Earnings have declined recently. In the last 12 months, it reported a loss of 9.5%. Revenue has grown 11.6% a year over the last 10 years. But it has declined to 6.9% in the last 12 months.

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GuruFocus ranked the company 5 out of 10 in financial strength and 7 out of 10 in profitability and growth. The company has a market cap of $1.36 billion.

Competitors like Domino’s Pizza (

DPZ, Financial) are much larger in terms of market cap. The industry’s leader is McDonald’s Corp. (MCD, Financial) with 37.3% of the industry. The fast-food restaurant is followed by Starbucks Corp. (SBUX, Financial). The market cap analyis is provided by GuruFocus' industry overview pages.

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Southwest Airlines

The firm reported a significant holding in Southwest Airlines Co. (

LUV, Financial), which is selling at a discount of 67%. Tiger holds 15,000 shares of the company that were purchased in the fourth quarter of 2017 for a average price of $58.78 a share. Shares sit in about 0.11% of the equity portfolio. The investment has reported an estimated loss of 3%.

In Friday trading, the current price was $57.42 a share, up about 1.29% in early afternoon activity. The company’s shares rose by 50% in three years. Shares have declined 14% year to date. The stock reported a historical price-sales value of just over 49, which is less than its current sale price.

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On Friday, it traded at 9.40 times price-earnings, which is higher than 57% of companies in its peer group, the Global Airlines Industry. It is trading at 13 times forward price-earnings, which is higher than 51% of its peers. Its price-book ratio is 3.30 and its price-sales ratio is 1.57. Both ratios are more than 70% lower than its peers.

The Dallas-based carrier carried a 2.5-star rating from the business predictability evaluator of GuruFocus. The rating is provided to stocks that jumped, on average, 7.3% a year over the last decade. The airline has grown substantially in the last 10 years in earnings and revenue. Southwest reported 11% in annual revenue growth and 20% in average earnings growth over the last decade.

In terms of market cap, it is second-largest in the industry, capturing 23.5% of the market. In first place is Delta Airlines (

DAL, Financial) with a market cap of 26.8%. Others include American Airlines Group (AAL, Financial), Alaska Air Group (ALK, Financial) JetBlue Airways (JBLU, Financial) and Copa Holdings SA (CPA, Financial). The figures are based on GuruFocus industry overview pages.

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Southwest has a market cap of $32 billion. GuruFocus ranks it 7 out of 10 in financial strength and 8 of 10 in profitability and growth.

L Brands

Another undervalued stock in Tiger’s portfolio is that of Ohio-based L Brands Inc. (

LB, Financial). In the last five years, the firm opened a new position of 20,000 shares for an average price of $72.69. The firm sold out in the first quarter of last year at $55.77 a share.

Tiger Management came back to the stock, however, in the fourth quarter of last year, initiating a holding of 10,000 shares. Last quarter, the firm reduced shares by 20%. It now holds about 8,000 shares, which sit in a portfolio space of 0.04%.

The investment has produced an estimated loss of 28% in trading.

The stock traded on Friday for a price of $32.90 a share, up more than 2.5%. Year to date, it is down 45%. The GuruFocus median price-sales chart shows the stock traded below its historical value on Friday.

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On Friday, it traded at 10.08 times price-earnings and 11.03 times forward price-earnings. Both ratios are ranked higher than 70% of companies in the Global Apparel Stores Industry. L Brands has a price-sales ratio of 0.74, which is 60% lower than its peers.

It pays a whopping dividend of 7.3%, which is ranked higher than 88% of its peers. The payout is 74%.

The stock has grown an average of 6% a year over the last 10 years. It reported an average earnings growth of 11.9% over the same period of time. In the last 12 months, the company reported earnings growth of -9.5%.

GuruFocus identified one warning sign. That is an operating margin that has experienced an average rate of decline of -2.1% over the last five years.

At the same time, the company reported an operating margin of more than 13%, which is higher than 88% of the industry.

GuruFocus ranks the company 5 out of 10 in financial strength and 7 of 10 in profitability and growth. It has a market cap of $9 billion.

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