Ronald Muhlenkamp (Trades, Portfolio), leader of investment firm Muhlenkamp & Co. Inc., disclosed in his second-quarter portfolio that he exchanged his Bristol-Myers Squibb Co. (BMY, Financial) holding for a position in Jazz Pharmaceuticals PLC (JAZZ, Financial).
With the goal of maximizing returns through capital appreciation, as well as income from dividends and interest, Muhlenkamp typically invests in highly profitable companies trading at a discount.
Bristol-Myers Squibb
In his largest trade of the quarter, Muhlenkamp cashed in on his 178,436 remaining shares of Bristol-Myers Squibb for an average price of $54.03 per share, impacting the equity portfolio by -4.09%. GuruFocus estimates the guru has made a 6% gain on the investment since being established in the first quarter of 2014.
The New York-based pharmaceutical company has a market cap of $97.13 billion; its shares were trading around $59.39 on Monday with a price-earnings ratio of 248.02, a price-book ratio of 7.89 and a price-sales ratio of 4.53.
The Peter Lynch chart below suggests the stock is undervalued since it is trading below its fair value.
Bristol-Myers’ financial strength and profitability and growth were both rated 7 out of 10 by GuruFocus. Not only does the company benefit from a sufficient level of interest coverage, but the Altman Z-Score of 5.5 indicates it is financially strong. While the operating margin is in decline, it still outperforms 75% of competitors. In addition, the company has a moderate Piotroski F-Score of 6 and a business predictability ranking of one out of five stars. According to GuruFocus, companies with this rank see their stock prices grow an average of 1.1% per year. The rank is on watch, however, which means conditions in its operations or industry may change its fiscal standing.
Of the gurus invested in Bristol-Myers, the Vanguard Health Care Fund (Trades, Portfolio) has the largest position with 3.1% of outstanding shares. Dodge & Cox, Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Spiros Segalas (Trades, Portfolio), the T Rowe Price Equity Income Fund (Trades, Portfolio), Manning & Napier Advisors, Ken Fisher (Trades, Portfolio), Leon Cooperman (Trades, Portfolio), Mairs and Power (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio) and many other gurus also have positions in the stock.
Jazz Pharmaceuticals
The guru invested in 37,155 shares of Jazz Pharmaceuticals for an average price of $163.37 per share, allocating 2.44% of the equity portfolio to the holding.
The Irish biopharmaceutical company has a $10.59 billion market cap; its shares were trading around $175.37 on Monday with a price-earnings ratio of 24.81, a price-book ratio of 3.70 and a price-sales ratio of 6.02.
According to the Peter Lynch chart below, the stock is overpriced because it is trading higher than its fair value.
Jazz Pharmaceuticals’ financial strength was rated 6 out of 10 by GuruFocus. While it has mediocre interest coverage, the Altman Z-Score of 3.7 indicates the company is financially strong. The company’s profitability and growth scored an 8 out of 10 rating as its operating margin is expanding. In addition, it has a high Piotroski F-Score of 7 and a one-star business predictability ranking.
With 1.59% of outstanding shares, Simons is the company’s largest guru shareholder. Andreas Halvorsen (Trades, Portfolio), Lee Ainslie (Trades, Portfolio) and Steven Cohen (Trades, Portfolio) are also shareholders.
Other trades
During the quarter, Muhlenkamp also added to his Pfizer Inc. (PFE, Financial) holding.
Positions that were trimmed include Gilead Sciences Inc. (GILD, Financial), ON Semiconductor Corp. (ON, Financial), Express Scripts Holding Co. (ESRX, Financial), Delta Air Lines Inc. (DAL, Financial), DowDuPont Inc. (DWDP, Financial), Alliance Data Systems Corp. (ADS, Financial), Lannett Co. Inc. (LCI, Financial) and Naspers Ltd. (NPSNY, Financial).
The guru’s 37-stock portfolio is largely invested in the technology and health care sectors. According to GuruFocus, the Pennsylvania-based firm posted an 18.77% return in 2017, underperforming the S&P 500’s return of 21.71%.
Disclosure: No positions.
