Century Management leader Arnold Van Den Berg (Trades, Portfolio) released his second-quarter portfolio last week.
Van Den Berg, who is a Holocaust survivor, considers himself a student of Benjamin Graham, seeking to invest in the stocks of companies that are trading at a discount in order to achieve long-term growth of capital.
During the quarter, the guru gained a position in Granite Construction Inc. (GVA, Financial) when it bought Layne Christensen Co. (LAYN, Financial). He also exited his Orion Group Holdings Inc. (ORN, Financial) position.
Granite Construction and Layne Christensen
The guru gained a 350,858-share holding of Granite Construction when it acquired Layne Christensen on June 14. The trade had an impact of 2.63% on the equity portfolio. He previously sold out of Granite in the first quarter of 2015.
According to the terms of the stock-for-stock deal, which was valued at roughly $536 million, shareholders of The Woodlands, Texas-based global water management, infrastructure services and drilling company received 5.62 million shares of Granite stock, which represented approximately 12% of the California-based construction company’s outstanding shares. Layne clarified in its press release that its shareholders received 0.27 Granite shares per share owned.
Granite Construction, which has a $2.03 billion market cap, was trading around $44.55 on Friday with a price-earnings ratio of 30.45, a price-book ratio of 1.61 and a price-sales ratio of 0.56.
The Peter Lynch chart below suggests the stock is overpriced since it is trading higher than its fair value.
GuruFocus rated Granite’s financial strength 7 out of 10. While the company has good interest coverage, its Altman Z-Score of 2.9 indicates it is under some financial stress. The company’s profitability and growth scored a 6 out of 10 rating as a result of poor margins and returns. It is strengthened, however, by a moderate Piotroski F-Score of 5, which implies business conditions are stable, and a business predictability rank of one out of five stars. According to GuruFocus, stocks with this rank typically see an average gain of 1.1% per year.
Before the deal closed, Chuck Royce (Trades, Portfolio), Mario Gabelli (Trades, Portfolio) and Jim Simons (Trades, Portfolio)’ Renaissance Technologies were also invested in Layne Christensen. They now have positions in Granite. Other guru shareholders are Pioneer Investments (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio) and Jeff Auxier (Trades, Portfolio).
Orion Group Holdings
Van Den Berg sold his 592,310 remaining shares of Orion for an average price of $7.33 per share. The trade had an impact of -0.58% on the equity portfolio. GuruFocus estimates he has gained 17% on the investment since the first quarter of 2012.
The Houston-based engineering and construction company has a $254.27 million market cap; its shares were trading around $8.78 on Friday with a price-earnings ratio of 23.16, a price-book ratio of 1.04 and a price-sales ratio of 0.44.
According the the Peter Lynch chart below, the stock is overpriced.
Orion’s financial strength and profitability and growth were both rated 6 out of 10 by GuruFocus. As a result of issuing approximately $57.5 million in new long-term debt over the last several years, the Altman Z-Score of 2.77 indicates the company is under some financial pressure. While the company has poor margins and returns, its strong Piotroski F-Score of 7 suggests business conditions are good. It also has a one-star business predictability rank.
With 1.82% of outstanding shares, Simons is the company’s largest guru shareholder. Charles Brandes (Trades, Portfolio) and Royce are also shareholders.
Other trades
During the quarter, Van Den Berg also reduced his holdings of Enstar Group Ltd. (ESGR, Financial), Allegheny Technologies Inc. (ATI, Financial), Berkshire Hathaway Inc. (BRK.B, Financial) and several other companies. He expanded his positions in CK Hutchinson Holdings Ltd. (CKHUY, Financial), Reading International Inc. (RDI, Financial), Verizon Communications Inc. (VZ, Financial) and Allergan PLC (AGN, Financial), among others.
The Austin, Texas-based firm’s $743 million portfolio, which is composed of 47 stocks, is largely invested in the industrials and energy sectors. According to GuruFocus, the CM Value I Fund underperformed the S&P 500 in 2017 with a return of 2.74%. The index posted a 21.71% return.
Disclosure: No positions.
