Activist investment firm Jana Partners (Trades, Portfolio) revealed it curbed its stake in HD Supply Holdings Inc. (HDS, Financial) by 29.03% on Jan 8.
The New York-based firm, which was founded by Barry Rosenstein in 2001, uses a value-oriented, event-driven approach to picking stocks, often taking activist positions in order to help unlock value for shareholders.
According to GuruFocus real-time picks, a premium feature, following a reduction in October, the firm sold an additional 1.6 million shares of the Atlanta-based company for an average price of $37.85 per share. Jana now owns 3.8 million shares, representing 4.49% of its equity portfolio.
GuruFocus estimates Jana has gained 16% on the investment since the first quarter of 2016.
The industrial distribution company has a $6.85 billion market cap; its shares were trading around $38.48 on Wednesday with a price-earnings ratio of 23.24, a price-book ratio of 4.37 and a price-sales ratio of 1.23. GuruFocus noted these three metrics are near multiyear lows.
The Peter Lynch chart suggests the stock is overpriced since it is trading higher than its fair value.
In December, the company posted adjusted third-quarter earnings of $1 per share on $1.6 billion in revenue, beating forecasts set by analysts at Zacks Investment Research.
GuruFocus rated HD Supply’s financial strength 6 out of 10. Although the company has adequate interest coverage, the Sloan ratio indicates it has poor earnings quality. In addition, the Altman Z-Score of 2.9 suggests the company is facing some financial headwinds as its revenue per share has declined over the last several years.
The company’s profitability and growth did not fare as well, scoring a 5 out of 10 rating. In addition to operating margin expansion, HD Supply is supported by strong returns and a moderate Piotroski F-Score of 5, which means business conditions are stable.
Jana Partners is still HD Supply’s largest guru shareholder with 2.15% of outstanding shares. Other gurus invested in the stock as of the third quarter were Mario Cibelli (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Steven Cohen (Trades, Portfolio), First Eagle Investment (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Caxton Associates (Trades, Portfolio) and Mario Gabelli (Trades, Portfolio).
Portfolio composition
Jana’s $3.29 billion equity portfolio, which is heavily invested in the consumer defensive sector, is made up of 52 holdings.
As of Sept. 30, the firm’s five largest positions were Pinnacle Foods Inc. (PF, Financial), Zimmer Biomet Holdings Inc. (ZBH, Financial), HD Supply, Conagra Brands Inc. (CAG, Financial) and Tiffany & Co. (TIF, Financial).
Disclosure: No positions.
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