Ariel Investment leader John Rogers (Trades, Portfolio) disclosed on Wednesday he trimmed his Century Casinos Inc. (CNTY, Financial) stake by 36.87%.
The guru’s Chicago-based firm invests in undervalued small and mid-cap companies that have sustainable competitive advantages, high barriers to entry and predictable fundamentals that allow for double-digit earnings growth. Rogers emphasizes that patience, independent thinking and a long-term outlook are necessary for generating good returns.
According to GuruFocus Real-Time Picks, a Premium feature, the investor sold 1.1 million shares of the Colorado Springs, Colorado-based gaming company on June 30. He now holds 1.9 million shares, which represent approximately 0.23% of the equity portfolio. The stock traded for an average price of $9.70 per share.
GuruFocus data shows Rogers has gained an estimated 40% on the investment since the first quarter of 2014.
The company, which owns and operates casinos in the U.S., Canada and Europe, has a $279.38 million market cap; its shares were trading around $9.33 on Wednesday with a price-earnings ratio of 77.90, a price-book ratio of 1.56 and a price-sales ratio of 1.61.
The Peter Lynch chart shows the stock is trading above its fair value, suggesting it is overpriced.
On May 9, Century Casinos reported 1st-quarter results. It posted earnings of 4 cents per share on $45.6 million in net operating revenue, which grew 12% from the prior-year quarter. Later that month, the company announced it is expanding its Polish flagship casino by opening an additional gaming floor and, in June, it entered a $107 million deal to acquire the operations of three casinos from Eldorado Resorts Inc. (ERI, Financial).
GuruFocus rated Century Casinos’ financial strength 6.2 out of 10. As a result of issuing approximately $30.9 million in new long-term debt over the last three years, the company has poor interest coverage. In addition, the Altman Z-Score of 2.13 indicates it is under some fiscal pressure.
Driven by operating margin expansion, the company’s profitability and growth scored a 6 out of 10 rating. While Century has a moderate Piotroski F-Score of 4, which suggests business conditions are stable, its returns are weak and underperform a majority of competitors. The business predictability rank of one out of five stars is on watch since the company has recorded a decline in revenue per share over the last 12 months. According to GuruFocus, companies with this rank typically see their stocks gain an average of 1.1% per annum over a 10-year period.
Rogers, who held 10.23% of outstanding shares as of the end of the first quarter, is one of Century Casinos’ largest guru shareholders. BlackRock, Russell Investments Group, Chuck Royce (Trades, Portfolio) and Jim Simons (Trades, Portfolio)’ Renaissance Technologies also have positions in the stock.
Portfolio composition and performance
Rogers’ $8.05 billion equity portfolio, which is composed of 154 holdings, is largely invested in the financial services space, followed by smaller positions in the technology, industrials and consumer cyclical sectors.
Other companies he holds in the travel and leisure industry as of the end of the first quarter include Ballantyne Strong Inc. (BTN, Financial), Royal Caribbean Cruises Ltd. (RCL, Financial), The Madison Square Garden Co. (MSG, Financial), Mattel Inc. (MAT, Financial) and International Speedway Corp. (ISCA, Financial).
According to GuruFocus, the Ariel Fund returned -13.67% in 2018, underperforming the S&P 500 Index’s return of -4.38%.
Disclosure: No positions.
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