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. (FBHS, Financial), Masco Corp. (MAS, Financial), SVB Financial Group (SIVB, Financial), Terex Corp. (TEX, Financial) and Sanmina Corp. (SANM, Financial).
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.
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.
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.
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.
2019 Value Conference Speaker Mario Gabelli (Trades, Portfolio) also has a position in Fortune Brands Home & Security.
Masco
Black purchased 35,085 shares of Masco, giving the holding 1.28% equity portfolio space. Shares averaged $35.54 during the quarter.
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.
John Rogers (Trades, Portfolio), 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.
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.
Terex
Black purchased 35,959 shares of Terex, giving the holding 1.07% equity portfolio weight. Shares averaged $31.65 during the quarter.
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.
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.
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.
Disclosure: No positions.
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