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James Li
James Li
Articles (638)  | Author's Website |

Donald Smith’s Top 5 Position Boosts in 2nd Quarter

Guru establishes one position and increases holdings in three airlines

Donald Smith (Trades, Portfolio), chief investment officer of Donald Smith & Co., disclosed on Thursday that he established a position in Jefferies Financial Group Inc. (NYSE:JEF) during the second quarter.

Managing a portfolio of 64 stocks, Smith invests in companies with a deep-value investing approach: the guru seeks out-of-favor companies “that sell in the bottom decile of price-to-tangible-book value” according to his firm’s website. The guru’s top five position boosts for the quarter were Unum Group (NYSE:UNM), JetBlue Airways Corp. (NASDAQ:JBLU), Gold Fields Ltd. (NYSE:GFI), Air France-KLM (AFLYY)(XPAR:AF) and Avianca Holdings SA (NYSE:AVH).

Jefferies

Smith invested in 601,442 shares of Jefferies for an average price of $23.42 per share. The guru dedicated 0.4% of his equity portfolio to the position.

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Formerly known as Leucadia National (Trades, Portfolio) Corp., Jefferies reiterated on July 26 its strong results for the first half of 2018. Pretax income of $1.02 billion included an $873 million gain from Leucadia’s sale of 48% of National Beef “at an attractive valuation” according to CEO Rick Handler and President Brian Friedman. Management increased the company’s dividend to 12.5 cents per share, up 25% from its previous dividend.

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FPA Crescent Fund manager Steven Romick (Trades, Portfolio) established a 15.78 million-share stake in Jefferies during the quarter. Other gurus that own shares of the company include Chuck Royce (Trades, Portfolio).

Unum Group

Smith added 3,264,382 shares of Unum Group for an average price of $41.76 per share. The guru expanded his equity portfolio 3.49% with this transaction.

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Tennessee-based Unum Group provides income protection insurance products in the U.S. and the U.K. CEO Richard McKinney said on July 30 that net earnings for the quarter increased approximately 28 cents per share, driven by several factors, including “good premium growth and overall favorable benefits experience.”

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GuruFocus lists five positive investing signs for Unum Group, including consistent revenue growth and a dividend yield near a five-year high. The website gives Unum a business predictability rank of two stars.

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JetBlue

Smith added 2,719,980 shares of JetBlue for an average price of $19.25 per share. With this transaction, the guru increased his equity portfolio 1.49%.

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New York-based JetBlue said on Friday that traffic for July increased 6.2% year over year on a capacity increase of 4.1%. The company reiterated its third-quarter revenue per available seat mile guidance of 0-3%.

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GuruFocus lists four positive investing signs for JetBlue, including expanding operating margins and a strong Piotroski F-score of 7. JetBlue’s profitability ranks 8 out of 10 primarily due to net profit margins outperforming 92% of global competitors.

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Other gurus with positions in JetBlue include PRIMECAP Management (Trades, Portfolio), Richard Snow (Trades, Portfolio) and Pioneer Investments (Trades, Portfolio).

Gold Fields

Smith invested in 2,971,476 shares of Gold Fields for an average price of $3.74 per share. The guru increased his equity portfolio 0.31% with this transaction.

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Gold Fields engages in underground and surface gold and copper mining and related activities, including exploration, development, extraction, processing and smelting. The South African company’s profitability ranks 6 out of 10 as operating margins and returns are outperforming 79% and 66% of global competitors.

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Air France-KLM

Smith invested in 791,799 shares of Air France-KLM for an average price of $9.20 per share. With this transaction, the guru increased his equity portfolio 0.19%.

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Air France-KLM primarily operates in four business areas: air passenger transportation, aeronautics maintenance, cargo transportation and in-flight catering. The company’s profitability ranks a weak 2 out of 10, driven by several red flags, including a weak Piotroski F-score of 2, declining revenues and operating loss. Air France-KLM’s operating margin of -1.75% underperforms 80% of global competitors.

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Avianca Holdings

Smith invested in 887,658 shares of Avianca Holdings for an average price of $7.88 per share. With this transaction, the guru increased his equity portfolio 0.16%.

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Panama-based Avianca represents the integration of several airlines that operate domestically and internationally. The company’s profitability ranks 8 out of 10: even though operating margins underperform 65% of global competitors, Avianca’s three-year revenue growth rate of 16.30% outperforms 74% of global airlines.

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Disclosure: No positions.

About the author:

James Li
I am an editorial assistant and researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

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