Guru Frank Sands (Trades, Portfolio), CEO and chief investment officer of Sands Capital Management, revealed this week he added one new stock to his portfolio and divested of another on Dec. 31.
The Arlington, Virginia-based value investment firm, which was founded by Sands’ father in 1992, approaches stock picking with the belief that, over time, stock prices reflect the underlying company’s earnings growth. Using a fundamental, business-focused process, the investment team looks for a concentrated number of high-quality, wealth-creating, growth opportunities to hold for the long term.
Based on these criteria, Sands established a position in Match Group Inc. (MTCH, Financial) and closed his stake in Medidata Solutions Inc. (MDSO, Financial).
Match Group
According to GuruFocus real-time picks, a premium feature, Sands invested in 7.7 million shares of Match Group for an average price of $42.77 per share, allocating 0.93% of the equity portfolio to the stake.
The Dallas-based operator of online dating sites, which include Match, Plenty of Fish and Tinder, has a $12.47 billion market cap; its shares were trading around $44.83 on Friday with a price-earnings ratio of 38.12, a price-book ratio of 19.50 and a price-sales ratio of 7.83.
The Peter Lynch chart shows the stock is trading higher than its fair value, suggesting it is overpriced.
GuruFocus rated Match’s financial strength 6 out of 10. In addition to having adequate interest coverage, the Altman Z-Score of 6.42 indicates the company is in good fiscal standing.
The company’s profitability and growth fared even better, scoring an 8 out of 10 rating as a result of operating margin expansion, good returns and a high Piotroski F-Score of 7, which implies business conditions are healthy.
With his purchase of 2.78% of Match’s outstanding shares, Sands became its largest shareholder among the gurus. Other investors with positions in the stock as of the third quarter are Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Lee Ainslie (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Caxton Associates (Trades, Portfolio).
Medidata Solutions
The investor sold his 2.14 million remaining shares of Medidata Solutions for an average price of $67.42 per share, impacting the equity portfolio by -0.44%. According to GuruFocus, Sands gained an estimated 46% on the investment since establishing it in the second quarter of 2014.
The American software company, which provides cloud-based solutions and services for health and life sciences companies, has a $4.16 billion market cap; its shares were trading around $68.04 on Friday with a price-earnings ratio of 80.99, a price-book ratio of 7.01 and a price-sales ratio of 6.77.
According to the Peter Lynch chart, the stock is overvalued.
Medidata’s financial strength and profitability and growth were both rated 7 out of 10 by GuruFocus. Although the company has low interest coverage and its assets are building at a faster rate than its revenue growth, the Altman A-Score of 10.3 suggests it is in good fiscal health.
The company is also supported by expanding operating margins, strong returns, a moderate Piotroski F-Score of 5, which indicates conditions are stable, and business predictability rank of one out of five stars. GuruFocus says companies with this rank typically see their stock gain an average of 1.1% per year.Ă‚
Chuck Royce (Trades, Portfolio) is now the company’s largest guru investor with 1.58% of outstanding shares. The Eaton Vance Worldwide Health Sciences Fund (Trades, Portfolio), Pioneer Investments (Trades, Portfolio) and Jones are also shareholders.
Additional trades
To close out 2018, real-time picks also showed Sands beefed up his holdings of Atlassian Corp. PLC (TEAM, Financial) and Floor & Decor Holdings Inc. (FND, Financial) as well as pared his Loxo Oncology Inc. (LOXO, Financial) and Galapagos NV (GLPG, Financial) positions.
Sands’ $35.36 billion equity portfolio, which is composed of 68 stocks, is largely invested in the technology, consumer cyclical and health care sectors. According to its website, as of Sept. 30, the Select Growth Fund had posted a 29.4% net return for 2018, compared to the Russell 1000 Index’s return of 17.1%.
Disclosure: No positions.
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