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James Li
James Li
Articles (1292)  | Author's Website |

Scott Black’s Top 5 Buys in 1st Quarter

Graham-Dodd disciple’s top buys include 2 building materials companies

Scott Black (Trades, Portfolio), chief investment officer of Delphi Management Inc., disclosed this week his top five buys for the first quarter were Fortune Brands Home & Security Inc. (NYSE:FBHS), Masco Corp. (NYSE:MAS), SVB Financial Group (NASDAQ:SIVB), Terex Corp. (NYSE:TEX) and Sanmina Corp. (NASDAQ:SANM).

Black, a disciple of the Graham-Dodd school of value investing, pursues a conservative investment strategy that emphasizes the fundamental performance of underlying companies. According to his firm’s website, Delphi believes investments should be purchased at a low absolute valuation. Further, Delphi contacts company management before committing client money to the stock.

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As of quarter-end, the $107.96 million equity portfolio contains 92 stocks, of which 15 represent new holdings. The portfolio’s top four sectors in terms of weight are consumer cyclical, financial services, technology and industrials.

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Fortune Brands Home & Security

Black purchased 29,945 shares of Fortune Brands Home & Security, giving the position 1.32% weight in the equity portfolio. Shares averaged $44.82 during the quarter.

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The Deerfield, Illinois-based company sells home and security products through four operating segments: cabinets, plumbing, security and doors. GuruFocus ranks the company’s profitability 7 out of 10 on several positive indicators, which include expanding profit margins, a three-year revenue growth rate that outperforms 79% of global competitors and a return on equity that outperforms 80% of global competitors.

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2019 Value Conference Speaker Mario Gabelli (Trades, Portfolio) also has a position in Fortune Brands Home & Security.

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Masco

Black purchased 35,085 shares of Masco, giving the holding 1.28% equity portfolio space. Shares averaged $35.54 during the quarter.

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The Livonia, Michigan-based company sells home improvement products like plumbing, decorative architecture, cabinets and windows. GuruFocus ranks the company’s profitability 7 out of 10 on several positive signs, which include expanding profit margins and a return on assets that outperforms 87.32% of global competitors. Despite this, Masco’s financial strength ranks 5 out of 10 as interest coverage that underperforms 58.88% of global competitors offsets a moderately strong Piotroski F-score of 6.

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John Rogers (TradesPortfolio), founder of Ariel Investments, also has a position in Masco.

SVB Financial

Black purchased 5,933 shares of SVB Financial, giving the holding 1.22% weight in the equity portfolio. Shares averaged $232.36 during the quarter.

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The Santa Clara, California-based regional bank provides loans and ancillary financial services to startups, private equity and venture capital firms. GuruFocus ranks the bank’s financial strength 5 out of 10: Although the company’s cash-debt ratio of 9.52 outperforms 61.84% of global competitors, SVB Financial’s equity-to-asset ratio of 0.09 underperforms 63.18% of global U.S. regional banks.

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Terex

Black purchased 35,959 shares of Terex, giving the holding 1.07% equity portfolio weight. Shares averaged $31.65 during the quarter.

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The Westport, Connecticut-based company manufactures various construction and materials processing equipment. GuruFocus ranks the company’s financial strength 5 out of 10 on several moderately severe signs, which include a weak Piotroski F-score of 3, a cash-debt ratio that underperforms 54.55% of global competitors and a debt-to-Ebitda ratio that exceeds Joel Tillinghast’s warning level of 4.

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Sanmina

Black purchased 34,822 shares of Sanmina, giving the holding 0.93% weight in the equity portfolio. Shares averaged $29.38 during the quarter.

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The San Jose, California-based company provides integrated manufacturing solutions, components and after-market services to original equipment manufacturers in the communication networks, storage, industrial, aerospace and defense markets. GuruFocus ranks the company’s financial strength 6 out of 10 on several positive indicators, which include a strong Piotroski F-score of 7 and a debt-to-Ebitda ratio of 1.97, within the safe threshold of 4. Despite this, interest coverage of 8.36 underperforms 68.85% of global competitors.

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Disclosure: No positions.

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About the author:

James Li
I am an editorial 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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