Investor Robert Olstein (Trades, Portfolio), the founder of Olstein Capital Management, revealed in his portfolio this week that he established one new position and exited three others in the first quarter.
With the goal of producing long-term capital appreciation, the guru’s New York-based firm invests in undervalued companies that have good financial strength, a competitive edge and are able to generate free cash flow. According to its website, the investment team also takes downside risk into consideration before pursuing a position.
Based on these criteria, Olstein opened a position in Dollar Tree Inc. (DLTR, Financial) during the quarter and divested of his Goodyear Tire & Rubber Co. (GT, Financial), Newell Brands Inc. (NWL, Financial) and Delphi Technologies PLC (DLPH, Financial) holdings.
Dollar Tree
The guru invested in 31,000 shares of Dollar Tree, allocating 0.54% of the equity portfolio to the position. The stock traded for an average price of $98 per share during the quarter.
The Chesapeake, Virginia-based discount retailer has a $25.2 billion market cap; its shares were trading around $105.64 on Friday with a forward price-earnings ratio of 19.80, a price-book ratio of 4.44 and a price-sales ratio of 1.10.
The median price-sales chart shows the stock is trading below its historical value, suggesting it is undervalued.
GuruFocus rated Dollar Tree’s financial strength 6 out of 10. While the company has insufficient interest coverage, the Altman Z-Score of 3.91 indicates it is in good fiscal standing.
The retailer’s profitability and growth scored a 7 out of 10 rating. Although the operating margin is in decline, it still outperforms 88% of competitors. In addition, Dollar Tree is supported by a moderate Piotroski F-Score of 4, which implies business conditions are stable. The business predictability rank of one out of five stars, however, is on watch as a result of a slowdown in revenue per share growth over the last 12 months. GuruFocus says companies with this rank typically see their stocks gain an average of 1.1% per year.
Of the gurus invested in Dollar Tree, Chuck Akre (Trades, Portfolio) has the largest stake with 2.14% of outstanding shares. Other top guru shareholders include Pioneer Investments (Trades, Portfolio), Wallace Weitz (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Tom Gayner (Trades, Portfolio), Arnold Van Den Berg (Trades, Portfolio), Ken Heebner (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Philippe Laffont (Trades, Portfolio).
Goodyear Tire & Rubber
Olstein dumped his 450,300 remaining shares of Goodyear, impacting the equity portfolio by -1.50%. During the quarter, the stock traded for an average price of $19.49 per share. GuruFocus estimates the guru lost 36% on the investment since the first quarter of 2017.
The tire manufacturer, which is headquartered in Akron, Ohio, has a market cap of $3.89 billion; its shares were trading around $16.83 on Friday with a price-earnings ratio of 7.15, a price-book ratio of 0.84 and a price-sales ratio of 0.29.
According to the Peter Lynch chart, the stock is undervalued.
Goodyear’s financial strength and profitability and growth were both rated 5 out of 10 by GuruFocus. As a result of issuing approximately $434 million in new long-term debt over the last three years, the company has weak interest coverage. In addition, the Altman Z-Score of 1.84 indicates it is under some fiscal stress.
Although the operating margin is expanding and returns outperform at least half of industry peers, the company has recorded a decline in revenue per share over the last five years. Goodyear also has a moderate Piotroski F-Score of 6 and a one-star business predictability rank.
With 3.34% of outstanding shares, Hotchkis & Wiley is the company’s largest guru shareholder. Cohen, Joel Greenblatt (Trades, Portfolio), John Buckingham (Trades, Portfolio), Jones, Pioneer, Ray Dail and Mario Gabelli (Trades, Portfolio) also have positions in the stock.
Newell Brands
The investor sold his remaining 469,000 shares of Newell Brands. The trade had an impact of -1.42% on the equity portfolio. Shares traded for an average price of $18.40 during the quarter. According to GuruFocus, Olstein lost an estimated 12% on the investment since establishing it in fourth-quarter 2016.
The Hoboken, New Jersey-based consumer goods manufacturer, which owns brands like Rubbermaid, Elmer’s, Sharpie, Paper Mate and Sunbeam, has a $6.38 billion market cap; its shares were trading around $15.03 on Friday with a forward price-earnings ratio of 13.02, a price-book ratio of 1.28 and a price-sales ratio of 0.81.
Based on the median price-sales chart, the stock appears to be trading below its historical value.
GuruFocus rated Newell Brands’ financial strength 4 out of 10. In addition to poor earnings quality, the company has low interest coverage and the Altman Z-Score of -0.60 warns it is at risk of going bankrupt.
The company’s profitability and growth fared better, scoring a 7 out of 10 rating. Although the operating margin is in decline, it still outperforms 62% of competitors. Returns, however, are negative and underperform a majority of industry peers, while the Piotroski F-Score of 6 is stable. Newell’s one-star business predictability rank is on watch as a result of declining revenue per share over the last five years.
Carl Ichan is Newell Brands’ largest guru shareholder with a 9.73% stake. Other top guru shareholders include Richard Pzena (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Arnold Schneider (Trades, Portfolio), Greenblatt, Gabelli, Pioneer, Jones, Murray Stahl (Trades, Portfolio) and Cohen.
Delphi Technologies
Olstein shed his 341,500 remaining shares of Delphi Technologies, impacting the equity portfolio by -0.80%. The stock traded for an average price of $18.40 per share during the quarter. GuruFocus data shows the guru lost an estimated 10% on the investment since establishing it in second-quarter 2013.
The British auto parts manufacturer, which provides electric vehicle and internal combustion engine propulsion solutions, has a market cap of $1.85 billion; its shares were trading around $20.99 on Friday with a price-earnings ratio of 6.75, a price-book ratio of 5.25 and a price-sales ratio of 0.40.
The Peter Lynch chart suggests the stock is undervalued.
Delphi’s financial strength and profitability and growth were both rated 5 out of 10 by GuruFocus. In addition to having insufficient interest coverage, the Altman Z-Score of 2.07 indicates the company is under some fiscal pressure as it has recorded a decline in revenue per share over the last 12 months.
The company is supported by strong margins and returns that outperform at least 65% of competitors. It also has a moderate Piotroski F-Score of 5.
Of the gurus invested in Delphi, Bill Nygren (Trades, Portfolio) has the largest position with 4.22% of outstanding shares. Other guru shareholders are Larry Robbins (Trades, Portfolio), Greenblatt, Pioneer, Jeremy Grantham (Trades, Portfolio) and Gabelli.
Additional trades
Olstein made several other changes to the portfolio during the quarter. He boosted a number of holdings, including CVS Health Corp. (CVS, Financial), Greenbrier Companies Inc. (GBX, Financial) and SeaWorld Entertainment Inc. (SEAS, Financial). He also trimmed his positions in Keysight Technologies Inc. (KEYS, Financial), Apple Inc. (AAPL, Financial) and Alphabet Inc. (GOOG, Financial), among others.
The guru’s $606.17 million equity portfolio, which is composed of 111 stocks, is heavily invested in the consumer cyclical, financial services, industrials and technology sectors. According to its fact sheet, the Olstein All Cap Value Fund returned -10.99% in 2018. Its benchmark, the Russell 3000 Index, posted a -5.24% return.
Disclosure: No positions.
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