Century Management leader Arnold Van Den Berg (Trades, Portfolio) disclosed in his third-quarter portfolio last week that he established two positions.
The guru, who is a Holocaust survivor, considers himself a student of Benjamin Graham. His Austin, Texas-based firm seeks to invest in companies that are trading at a discount in order to achieve long-term capital growth.
Based on these criteria, the investor took positions in Dollar Tree Inc. (DLTR, Financial) and Transocean Ltd. (RIG, Financial) during the quarter.
Dollar Tree
Having previously closed a position in Dollar Tree in the fourth quarter of 2017, Van Den Berg opened a new 101,995-share holding for an average price of $87.62 per share, giving it 1.12% space in the equity portfolio.
The Chesapeake, Virginia-based discount retail chain has a market cap of $20.59 billion; its shares were trading around $83.67 on Monday with a price-earnings ratio of 11.35, a price-book ratio of 2.52 and a price-sales ratio of 0.87.
The Peter Lynch chart shows the stock is trading below its fair value, suggesting it is undervalued.
GuruFocus rated Dollar Tree’s financial strength 6 out of 10. Despite having inadequate interest coverage and recording a slowdown in revenue per share growth over the last 12 months, the Altman Z-Score of 3.38 implies the company is in good fiscal standing. The company’s profitability and growth scored a 9 out of 10 rating. Although the operating margin is in decline, it still outperforms 88% of competitors. The company is also supported by good returns, a high Piotroski F-Score of 7, which indicates the company’s operations are healthy, and a business predictability rank of 4.5 out of five stars. According to GuruFocus, companies with this rank typically see their stock prices gain an average of 10.6% per year.
Of the gurus invested in Dollar Tree, Chuck Akre (Trades, Portfolio) has the largest stake with 2.14% of outstanding shares. Other guru shareholders are Larry Robbins (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Jana Partners (Trades, Portfolio), Wallace Weitz (Trades, Portfolio), Tom Gayner (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), John Hussman (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Chuck Royce (Trades, Portfolio) and Jim Simons (Trades, Portfolio)’ Renaissance Technologies.
Transocean
The guru invested in 421,778 shares of Transocean for an average price of $12.42 per share, allocating 0.80% of the equity portfolio to the position.
The Swiss offshore drilling contractor has a $5.17 billion market cap; its shares were trading around $8.05 on Monday with a price-book ratio of 0.31 and a price-sales ratio of 1.22.
According to the median price-sales chart, the stock is trading below its historical value.
Transocean’s financial strength and profitability and growth were both rated 5 out of 10 by GuruFocus. As a result of poor interest coverage and declining revenue per share, the Altman Z-Score of 0.39 warns the company is at risk of going bankrupt. Despite underperforming a majority of industry peers, the operating margin is expanding, which is usually a good sign. The company is further weakened by low returns, but has a moderate Piotroski F-Score of 5 and a one-star business predictability rank, which, according to GuruFocus, means it sees its stock gain an average of 1.1% per year.
With 6.96% of outstanding shares, PRIMECAP Management (Trades, Portfolio) is the company’s largest guru shareholder. Other gurus with positions in the stock are Simons’ firm, Caxton Associates (Trades, Portfolio), Arnold Schneider (Trades, Portfolio), Lee Ainslie (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Greenblatt, Jones, Ron Baron (Trades, Portfolio) and Murray Stahl (Trades, Portfolio).
Additional trades
During the quarter, Van Den Berg also added to his holdings of Schlumberger Ltd. (SLB, Financial), Apache Corp. (APA, Financial), AmerisourceBergen Corp. (ABC, Financial), McKesson Corp. (MCK, Financial), Ardmore Shipping Corp. (ASC, Financial), Murphy Oil Corp. (MUR, Financial) and Diamond Offshore Drilling Inc. (DO, Financial).
The guru’s $739.75 million portfolio, which is composed of 43 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.
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