Bill Nygren (Trades, Portfolio), manager of the Oakmark Fund, revealed two new positions when he released his first-quarter portfolio earlier this week.
To achieve long-term capital appreciation, the guru, who also manages the Chicago-based firm’s Select and Global Select funds, usually invests in mid- and large-cap companies. When picking stocks, he looks for growing companies that have shareholder-oriented management teams. According to the fund’s fact sheet, he prefers to take a position when the stock is trading at a substantial discount to his estimate of intrinsic value, then waits for the gap between the two to close before selling.
Based on these criteria, Nygren established holdings in Constellation Brands Inc. (STZ, Financial) and S&P Global Inc. (SPGI, Financial) during the quarter.
Constellation Brands
The guru invested in 1.35 million shares of Constellation Brands, dedicating 1.38% of the equity portfolio to the stake. The stock traded for an average price of $168.34 per share during the quarter.
The New York-based company, which produces beer, wine and spirits, has a $36.74 billion market cap; its shares were trading around $191.23 on Wednesday with a price-earnings ratio of 10.99, a price-book ratio of 4.43 and a price-sales ratio of 5.
The Peter Lynch chart shows the stock is trading below its fair value, suggesting it is undervalued.
GuruFocus rated Constellation’s financial strength 5 out of 10. Although the company has issued approximately $5.8 billion in new long-term debt over the last three years, it is at a manageable level as a result of sufficient interest coverage. The Altman Z-Score of 2.85, however, indicates it is under some fiscal pressure.
The company’s profitability and growth fared better, scoring an 8 out of 10 rating. In addition to operating margin expansion, Constellation is supported by strong returns that outperform over 75% of competitors, consistent earnings and revenue growth and a moderate Piotroski F-Score of 5, which implies business conditions are stable. It also has a business predictability rank of 3.5 out of five stars. According to GuruFocus, companies with this rank typically see their stocks gain an average of 9.3% per year.
Of the gurus invested in Constellation Brands, Steve Mandel (Trades, Portfolio) has the largest position with 2.58% of outstanding shares. Other top guru shareholders include Daniel Loeb (Trades, Portfolio), Diamond Hill Capital (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Ray Dalio (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio), Jim Simons' (Trades, Portfolio) Renaissance Technologies, Lee Ainslie (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Leucadia National (Trades, Portfolio), Murray Stahl (Trades, Portfolio) and Ron Baron (Trades, Portfolio).
S&P Global
The investor picked up 862,000 shares of S&P Global, allocating 1.06% of the equity portfolio to the holding. During the quarter, shares traded for an average price of $193.28.
Headquartered in New York, the capital markets company, which provides financial information and analytics, has a market cap of $54.94 billion; its shares were trading around $223.36 on Wednesday with a price-earnings ratio of 29.95, a price-book ratio of 169.44 and a price-sales ratio of 8.97.
According to the Peter Lynch chart, the stock is overvalued.
Boosted by comfortable interest coverage, S&P Global’s financial strength was rated 6 out of 10 by GuruFocus. In addition, the robust Altman Z-Score of 6.81 suggests it is in good fiscal standing despite seeing a decline in revenue per share growth over the last 12 months.
The company’s profitability and growth fared even better, scoring a 9 out of 10 rating on an expanding operating margin, strong returns that outperform a majority of industry peers and a high Piotroski F-Score of 8, which indicates business conditions are healthy. It also has a one-star business predictability rank. GuruFocus says companies with this rank typically see their stocks gain an average of 1.1% per year.
With 1.26% of outstanding shares, Mandel is the company’s largest guru shareholder. Other guru investors who own the stock include Spiros Segalas (Trades, Portfolio), Loeb, David Carlson (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Tom Gayner (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Gabelli, First Eagle Investment (Trades, Portfolio), Baron, George Soros (Trades, Portfolio), Simons’ firm, Greenblatt, Robert Olstein (Trades, Portfolio), Dodge & Cox and Stahl.
Additional trades
Nygren also added to his Booking Holdings Inc. (BKNG, Financial), Capital One Financial Corp. (COF, Financial), Hilton Worldwide Holdings Inc. (HLT, Financial), Apache Corp. (APA, Financial) and News Corp. (NWSA, Financial) positions during the quarter.
The guru’s $17.09 billion equity portfolio, which is composed of 53 stocks, is heavily invested in the financial services sector, followed by smaller holdings in the technology and consumer cyclical space. According to GuruFocus data, the fund underperformed the S&P 500 Index in 2018 with a return of -12.73%. The index posted a -4.38% return.
Disclosure: No positions.
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