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James Li
James Li
Articles (725)  | Author's Website |

Larry Robbins Powers Into Lithium Producer Livent

Guru real-time pick highlight

Larry Robbins (Trades, Portfolio), founder of Glenview Capital Management, disclosed this week he expanded his position in Livent Corp. (NYSE:LTHM).

Managing an equity portfolio of 50 stocks, Robbins focuses on delivering attractive absolute returns through an intense focus on deep fundamental research and individual security selection. According to GuruFocus Real-Time Picks, a Premium feature, Robbins added 10,324,137 shares of Livent for $12.58 per share, increasing his position 679.26% and his equity portfolio 1.24%.

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Company background

A pure-play, fully integrated lithium company, Livent produces products like battery-grade lithium hydroxide for use in high performance lithium-ion batters, and high purity lithium metal for use in lightweight materials for aerospace applications and non-rechargeable batteries.

Livent mentioned in its fiscal 2018 annual report that growth in electric vehicle sales are expected to increase demand in performance lithium compounds. The company announced in February 2018 it plans to expand its lithium hydroxide capacity to approximately 55,000 metric tons by the end of 2025 at multiple locations.

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GuruFocus ranks the company’s financial strength 8 out of 10 on several positive signs, which include a strong Altman Z-score of 8.32 and debt ratios that are outperforming over 80% of global competitors. Further, the company’s debt-to-EBITDA ratio of 0.20 is safely below Joel Tillinghast’s threshold of 4, while its interest coverage is significantly higher than Benjamin Graham’s required threshold of 5.

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Company profitability highlights

Livent said revenues for the year ending December 2018 were $442.5 million, up approximately 27% from full-year 2017. Results were driven primarily by higher volumes in lithium hydroxide, which contributed to 21% of the revenue increase, and higher pricing of products, which represented 8% of the revenue increase. Net income of $126.1 million was approximately three times the net income of the prior year due to favorable revenue and gross margin growth as well as the favorable tax provision for 2018.

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According to GuruFocus data, Livent’s operating margin of 37.31% and return on assets of 27.74% are both outperforming over 90% of global competitors, suggesting good profitability and growth potential relative to peers.

Company valuations

Shares of Livent closed at $12.59 on Friday, approximately 9% higher than its 52-week low of $11.55. The stock is trading slightly below its median price-sales value of $13.25; additionally, GuruFocus lists the positive investing signs of a price-book ratio and price-sales ratio near one-year lows.

See also

Robbins’ top five holdings as of December 2018 were Shire PLC (NASDAQ:SHPG), FMC Corp. (NYSE:FMC), IQVIA Holdings Inc. (NYSE:IQV), HCA Healthcare Inc. (NYSE:HCA) and CVS Corp. (NYSE:CVS). The fund manager has 53.12% of his equity portfolio in the health care sector.

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!

Visit James Li's Website


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