Jeff Ubben (Trades, Portfolio)’s ValueAct Capital disclosed three new positions in its third-quarter portfolio, which was released last week.
The San Francisco-based firm, which is known to be activist in nature, takes large positions in a handful of undervalued companies and works with them to maximize returns and unlock value. In July 2017, Ubben stepped down as chief investment officer, allowing protégé Mason Morfit to take the reins. Ubben remains at the firm as CEO.
During the quarter, the firm opened positions in Dentsply Sirona Inc. (XRAY, Financial), Hawaiian Electric Industries Inc. (HE, Financial) and Symantec Corp. (SYMC, Financial).
Dentsply Sirona
The firm invested in 2.2 million shares of Dentsply Sirona, which had an average price of $41.66 per share for the quarter, allocating 0.82% of the equity portfolio to the stake.
The York, Pennsylvania-based dental supplies manufacturer has an $8.23 billion market cap; its shares were trading around $36.99 on Wednesday with a forward price-earnings ratio of 16.31, a price-book ratio of 1.60 and a price-sales ratio of 2.09.
The median price-sales chart shows the stock is trading slightly below its historical value.
Supported by adequate interest coverage, Dentsply Sirona’s financial strength was rated 6 out of 10 by GuruFocus. The Altman Z-Score of 1.5, however, indicates the company is under some fiscal pressure as a result of declining revenue per share. The company’s profitability and growth scored a 5 out of 10 rating as a result of a declining operating margin, a negative net margin and poor returns. In addition, it has a moderate Piotroski F-Score of 4, which suggests operations are stable, and a business predictability rank of one out of five stars. According to GuruFocus, companies with this rank typically see their stock prices gain an average of 1.1% per year.
Of the gurus invested in Dentsply Sirona, First Eagle Investment (Trades, Portfolio) has the largest stake with 2.77% of outstanding shares. Other guru shareholders are Jim Simons' (Trades, Portfolio) Renaissance Technologies, Joel Greenblatt (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Chuck Royce (Trades, Portfolio), Ruane Cunniff (Trades, Portfolio) and Ray Dalio (Trades, Portfolio).
Hawaiian Electric
ValueAct picked up 1.19 million shares of Hawaiian Electric, which had an average price of $35.19 per share, dedicating 0.42% of the equity portfolio to the stake.
The Hawaiian electric utility company has a market cap of $4.08 billion; its shares were trading around $37.49 on Wednesday with a price-earnings ratio of 22.20, a price-book ratio of 1.93 and a price-sales ratio of 1.48.
According to the Peter Lynch chart, the stock is overpriced since it is trading higher than its fair value.
GuruFocus rated Hawaiian Electric’s financial strength 5 out of 10. As a result of issuing approximately $1.3 billion in new long-term debt over the last three years and reporting a decline in revenue per share, the company has poor interest coverage. Additionally, the Altman Z-Score of 0.60 indicates the company is in financial distress and in danger of going bankrupt. The company’s profitability and growth scored a 4 out of 10 rating. Despite having an expanding operating margin, it is being negatively affected by a weak net margin and poor returns. The company also has a moderate Piotroski F-Score of 4 and a one-star business predictability rank.
With its purchase of 1.1% of outstanding shares, ValueAct became Hawaiian Electric’s largest guru shareholder. Simons, Pioneer and Gabelli also have positions in the stock.
Symantec
After selling out of Symantec in the second quarter of 2014, the firm established a new 500,000-share holding. The stock had an average price of $20.37 per share. The position was given 0.10% space in the equity portfolio.
The Mountain View, California-based cybersecurity software company has a $13.97 billion market cap; its shares were trading around $21.86 on Wednesday with a price-earnings ratio of 12.15, a price-book ratio of 2.35 and a price-sales ratio of 2.98.
Based on the Peter Lynch chart, the stock appears to be undervalued.
Symantec’s financial strength and profitability and growth were both rated 5 out of 10 by GuruFocus. Weighed down by poor interest coverage and declining revenue per share, the Altman Z-Score of 1.36 suggests the company is at risk of bankruptcy. Despite having a declining operating margin, the company’s margins and returns outperform industry peers. In addition, it has a stable Piotroski F-Score of 6 and a one-star business predictability rank.
Larry Robbins (Trades, Portfolio) is the company’s largest guru shareholder with 0.98% of outstanding shares. Simons, NWQ Managers (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Pioneer, John Buckingham (Trades, Portfolio) and Greenblatt also hold the stock.
Additional trades
During the quarter, ValueAct also added to its positions in Seagate Technology PLC (STX, Financial), Morgan Stanley (MS, Financial), Citigroup Inc. (C, Financial), SLM Corp. (SLM, Financial), Strategic Education Inc. (STRA, Financial) and Enviva Partners LP (EVA, Financial).
The firm’s concentrated portfolio of 20 stocks, which is valued at roughly $10.17 billion, is largely invested in the financial services sector with a weight of 59.8%.
Disclosure: No positions.
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