Oakmark Fund manager Bill Nygren (Trades, Portfolio) disclosed two new holdings in his fourth-quarter 2018 portfolio, which was released last week.
The guru, who also manages the Chicago-based firm’s Select and Global Select funds, invests in mid- and large-cap companies to achieve capital appreciation. When picking stocks, he looks for growing companies that have shareholder-oriented management teams. According to the fund’s fact sheet, he will take a position when the stock is trading at a substantial discount to his estimate of intrinsic value, then wait for the gap between the two to close.
Based on these criteria, the guru established positions in eBay Inc. (EBAY, Financial) and Halliburton Co. (HAL, Financial) during the quarter.
EBay
Nygren invested in 6.5 million shares of eBay for an average price of $29.29 per share, allocating 1.16% of the equity portfolio to the stake. He previously sold out of the stock in the fourth quarter of 2012.
The San Jose, California-based e-commerce company, which facilitates consumer-to-consumer and business-to-consumer sales through its website, has a $33.23 billion market cap; its shares were trading around $36.32 on Monday with a price-earnings ratio of 14.19, a price-book ratio of 5.29 and a price-sales ratio of 3.34.
The Peter Lynch chart shows the stock is trading slightly below its fair value, suggesting it is undervalued.
GuruFocus rated eBay’s financial strength 5 out of 10. In addition to recording a decline in revenue per share over the last five years, the company also has poor interest coverage. The Altman Z-Score of 3.34, however, indicates it is in good fiscal standing. The company’s profitability and growth scored a 6 out of 10 rating, boosted by operating margin expansion, a high Piotroski F-Score of 8, which implies business conditions are healthy, and a business predictability rank of one out of five stars. GuruFocus says companies with this rank typically see their stocks gain an average of 1.1% per year.
Of the gurus invested in eBay, Seth Klarman (Trades, Portfolio) has the largest stake with 2.30% of outstanding shares. PRIMECAP Management (Trades, Portfolio), Larry Robbins (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), the Smead Value Fund (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Robert Olstein (Trades, Portfolio), Mario Cibelli (Trades, Portfolio), Lee Ainslie (Trades, Portfolio) and several other gurus are also shareholders.
Halliburton
The investor picked up 5.8 million shares of Halliburton for an average price of $33.43 per share, dedicating 0.98% of the equity portfolio to the position. He previously sold out in the first quarter of 2017.
The oilfield services company, which is headquartered in Houston, has a market cap of $24.85 billion; its shares were trading around $28.48 on Monday with a price-earnings ratio of 15.07, a price-book ratio of 2.61 and a price-sales ratio of 1.04.
According to the Peter Lynch chart, the stock is trading near its fair value.
Halliburton’s financial strength and profitability and growth were both rated 6 out of 10 by GuruFocus. Despite having poor interest coverage and posting declining earnings and revenue per share over the past several years, the Altman Z-Score of 3.15 suggests the company is in good fiscal health. Similarly, although the operating margin is in decline, it still outperforms 70% of competitors. The company is also supported by a high Piotroski F-Score of 8 and a one-star business predictability rank.
With 3.03% of outstanding shares, Dodge & Cox is the company’s largest guru shareholder. Other top guru investors include Sarah Ketterer (Trades, Portfolio), Richard Pzena (Trades, Portfolio), Pioneer, Hotchkis & Wiley, Tweedy Browne (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Ken Fisher (Trades, Portfolio), Gabelli, Steven Cohen (Trades, Portfolio), Greenblatt, Arnold Van Den Berg (Trades, Portfolio), John Buckingham (Trades, Portfolio) and T Boone Pickens (Trades, Portfolio).
Additional trades
During the quarter, Nygren also added to several positions, including General Electric Co. (GE, Financial), Facebook Inc. (FB, Financial), Netflix Inc. (NFLX, Financial), Hilton Worldwide Holdings Inc. (HLT, Financial) and General Motors Co. (GM, Financial), among others. He also sold out of Nestle SA (NSRGY, Financial), Oracle Corp. (ORCL, Financial), Medtronic PLC (MDT, Financial) and UnitedHealth Group Inc. (UNH, Financial).
The guru’s $14.11 billion portfolio, which is composed of 52 stocks, is heavily invested in the financial services sector, followed by smaller positions in the technology and consumer cyclical spaces. According to GuruFocus data, the fund underperformed the S&P 500 Index in 2018 with a return of -12.73%. The index posted a -5.97% return.
Disclosure: No positions.
