Robert Karr (Trades, Portfolio), founder of New York-based Joho Capital, disclosed three new positions in his first-quarter portfolio, which was released earlier this month.
A former protégé of Tiger Management’s Julian Robertson (Trades, Portfolio), the guru, who now manages a family office, focuses on a concentrated number of investments and specializes in online media stocks. He also has a very low portfolio turnover rate of 17% as of the most recent quarter.
Based on these criteria, Karr’s new buys for the quarter were Microsoft Corp. (MSFT, Financial), Spotify Technology SA (SPOT, Financial) and TJX Companies Inc. (TJX, Financial).
Microsoft
The guru invested in 408,000 shares of Microsoft, dedicating 8.11% of the equity portfolio to the holding. The stock traded for an average price of $108.95 per share during the quarter.
The Redmond, Washington-based technology company founded by Bill Gates (Trades, Portfolio) has a $963.45 billion market cap; its shares were trading around $123.82 on Friday with a price-earnings ratio of 27.52, a price-book ratio of 10.11 and a price-sales ratio of 7.87.
The Peter Lynch chart shows the stock is trading above its fair value, suggesting it is overpriced.
GuruFocus rated Microsoft’s financial strength 7 out of 10. Although the company has issued approximately $25.6 billion in new long-term debt over the last three years, it is at a manageable level as a result of adequate interest coverage. In addition, the robust Altman Z-Score of 5.03 indicates the company is in good fiscal standing.
The company’s profitability and growth scored a 9 out of 10 rating. While the operating margin is in decline, it still outperforms a majority of competitors. The company is also supported by strong returns, a high Piotroski F-Score of 8, which implies operations are healthy, consistent earnings and revenue growth and a business predictability rank of 4.5 out of five stars. According to GuruFocus, companies with this rank typically see their stocks gain an average of 10.6% per year.
Of the many gurus invested in Microsoft, PRIMECAP Management (Trades, Portfolio) has the largest stake with 0.49% of outstanding shares. Other top shareholders include Dodge & Cox, Ken Fisher (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Spiros Segalas (Trades, Portfolio), Chase Coleman (Trades, Portfolio), Andreas Halvorsen (Trades, Portfolio), Barrow, Hanley, Mewhinney & Strauss, Steve Mandel (Trades, Portfolio) and Hotchkis & Wiley.
Spotify
Karr picked up 220,000 shares of Spotify, allocating 5.15% of the equity portfolio to the position. During the quarter, the stock traded for an average price of $136.52 per share.
The Swedish music and audio streaming service has a market cap of $23.06 billion; its shares were trading around $125.31 on Friday with a price-book ratio of 8.13 and a price-sales ratio of 3.59.
According to the median price-sales chart, the stock is trading below its historical average.
Spotify’s financial strength was rated 6 out of 10 by GuruFocus. In addition to a high cash-debt ratio, the Altman Z-Score of 4.6 suggests the company is in good fiscal health.
The company’s profitability and growth did not fare as well, scoring a 2 out of 10 rating on negative margins and returns that underperform a majority of industry peers.
With 4.54% of outstanding shares, fellow tiger cub Chase Coleman (Trades, Portfolio) is Spotify’s largest guru shareholder. During the quarter, Stanley Druckenmiller (Trades, Portfolio) and Pioneer also established positions in the stock, while Ron Baron (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Robertson added to their holdings. Jim Simons' (Trades, Portfolio) Renaissance Technologies and Steven Cohen (Trades, Portfolio) reduced their positions.
TJX Companies
The investor purchased 35,614 shares of TJX Companies, giving it 0.32% space in the equity portfolio. Shares traded for an average price of $49.78 during the quarter.
The discounted department store chain, which is headquartered in Framingham, Massachusetts, has a $61.14 billion market cap; its shares were trading around $50.30 on Friday with a price-earnings ratio of 20.55, a price-book ratio of 12.09 and a price-sales ratio of 1.60.
Based on the Peter Lynch chart, the stock appears to be overvalued.
Driven by comfortable interest coverage and a high Altman Z-Score of 4.58, GuruFocus rated TJX’s financial strength 7 out of 10.
The company’s profitability and growth scored an 8 out of 10 rating. Although the operating margin is in decline, it still outperforms 84% of competitors. TJX is also supported by strong returns, a moderate Piotroski F-Score of 5, which suggests business conditions are stable, and steady earnings and revenue growth. It also has a four-star business predictability rank. GuruFocus says companies with this rank typically see their stocks gain an average of 9.8% per year.
PRIMECAP is the company’s largest guru shareholder with a 1.31% stake. Other top guru investors include Diamond Hill Capital (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), Pioneer, Joel Greenblatt (Trades, Portfolio), Cohen, Bacon, Simons’ firm, Ruane Cunniff (Trades, Portfolio), Philippe Laffont (Trades, Portfolio) and Lee Ainslie (Trades, Portfolio).
Additional trades
During the quarter, Karr also boosted his holdings of Farfetch Ltd. (FTCH, Financial) and The Estee Lauder Companies Inc. (EL, Financial) and trimmed his Floor & DĂ©cor Holdings Inc. (FND, Financial), Cognex Corp. (CGNX, Financial), Hexcel Corp. (HXL, Financial) and Alibaba Group Holding Ltd. (BABA, Financial) positions.
The guru’s $593.22 million equity portfolio, which is composed of 10 stocks, is largely invested in the consumer cyclical and technology sectors.
Disclosure: No positions.
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