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James Li
James Li
Articles (684)  | Author's Website |

Robert Olstein’s Top 5 Buys in 4th Quarter

Top buys include one new position and increased bets in Buffett’s Mastercard and Goldman Sachs

Robert Olstein (Trades, Portfolio), chairman and portfolio manager of Olstein Funds, disclosed last week he established a holding in Equifax Inc. (NYSE:EFX) during fourth-quarter 2018. The fund manager also disclosed his top four position boosts were Mastercard Inc. (NYSE:MA), Packaging Corp of America (NYSE:PKG), Goldman Sachs Group Inc. (NYSE:GS) and FedEx Corp. (NYSE:FDX).

Managing an equity portfolio of 112 stocks, Olstein seeks companies with high financial strength through a detailed look behind the numbers on a company’s financial statements. The Olstein Funds manager looks for companies that have strong cash flow and avoids aggressive accounting practices.

GuruFocus publishes a ratio called the Beneish M-score. Unlike Piotroski’s F-score or Altman’s Z-score, which measures business strength and bankruptcy risk, Beneish’s score measures the possibility of earnings manipulation. Companies with a low Beneish M-score are likely ones that avoid aggressive accounting practices that can result in revenue inflation and slower depreciation.

New buy: Equifax

Olstein invested in 43,000 shares of Equifax for an average price of $105.61 per share, giving the position 0.65% equity portfolio space.

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The Atlanta-based company provides a wide range of business services, including database management, marketing and business credit services. GuruFocus ranks the company’s financial strength 6 out of 10: even though the Piotroski F-score is just 4 out 9, Equifax’s Altman Z-score suggests low bankruptcy risk while its Beneish M-score suggests low chance of earnings manipulation.

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Equifax’s profitability ranks 8 out of 10 primarily due to operating margins that have increased over the past five years and are outperforming over 87% of global competitors. Despite this, the company’s 2.5-star business predictability rank is on watch as revenues have decelerated over the trailing 12 months.

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Markel Corp. (NYSE:MKL) co-CEO Tom Gayner (Trades, Portfolio) also established a holding in Equifax during the quarter.

Mastercard

Olstein added 20,900 shares of Mastercard for an average price of $197.68 per share. The fund manager increased his portfolio 0.65% with this transaction.

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One of several major credit card companies, Mastercard generates revenue through fees based on the dollar volume of card activity and the number of transactions processed. GuruFocus ranks the company’s financial strength 7 out of 10 on several positive signs, including a strong Piotroski F-score of 7 and an Altman Z-score that suggests little or no financial distress. Despite this, Mastercard’s Beneish M-score of -2.04 is slightly greater than the safe threshold of -2.22, suggesting slight earnings manipulation.

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Mastercard’s profitability ranks 8 out of 10 primarily due to operating margins that outperform 81% of global competitors and returns that outperform over 96% of global competitors.

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Berkshire Hathaway Inc. (NYSE:BRK.A)(NYSE:BRK.B) CEO Warren Buffett (Trades, Portfolio) has not released his fourth-quarter 2018 portfolio as the deadline is 45 days after quarter-end. Other gurus that added shares of Mastercard during the quarter were David Carlson (Trades, Portfolio) and Ken Fisher (Trades, Portfolio).

Packaging Corp of America

Olstein added 40,046 shares of Packaging Corp of America for an average price of $92.62 per share, boosting the position 121.35% and his equity portfolio 0.55%.

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The Lake Forest, Illinois-based company produces a wide variety of container board and corrugated products, including meat boxes for agricultural companies. GuruFocus ranks the company’s profitability 9 out of 10 on several strong indicators, including an excellent Piotroski F-score of 8 and a three-star business predictability rank. Additionally, Packaging Corp of America’s operating margin is outperforming 88% of global competitors.

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Despite strong profitability, the company’s financial strength ranks a modest 5 out of 10 as the equity-to-asset ratio of 0.39 and debt-to-equity ratio of 0.99 underperform over three-quarters of global competitors.

Goldman Sachs

Olstein added 18,500 shares of Goldman Sachs, one of Buffett’s top bank holdings, for an average price of $200.26 per share. The transaction increased the portfolio 0.51%.

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The New York-based bank provides investment banking services, institutional client services and investment management services around the world. GuruFocus ranks the bank’s financial strength 4 out of 10 on several weak signs, which include a debt-to-equity ratio of 3.43 and an equity-to-asset ratio of 0.10, both underperforming over 92% of global competitors.

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FedEx

Olstein added 19,000 shares of FedEx for an average price of $210.41 per share, boosting the holding 65.52% and his portfolio 0.50%.

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The Memphis, Tennessee-based company provides courier services through several divisions, including FedEx Express and FedEx Ground. GuruFocus ranks the company’s financial strength 6 out of 10: even though its debt-to-equity ratio underperforms 59% of global competitors, FedEx has a moderately strong Piotroski F-score of 6 and an Altman Z-score of 3.19.

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FedEx’s profitability ranks 8 out of 10 primarily due to a three-star business predictability rank and returns that are outperforming over 85% of global competitors.

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Disclosure: No positions.

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About the author:

James Li
I am an editorial assistant and researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

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