Olstein Capital Management leader Robert Olstein (Trades, Portfolio) released his second-quarter portfolio earlier this week, listing five new holdings.
With the goal of producing long-term capital appreciation, the guru’s New York-based firm invests in undervalued companies that have good financial strength, a competitive edge and are able to generate free cash flow. According to its website, the investment team also takes downside risk into consideration before pursuing a position.
Based on these criteria, Olstein established positions in Norwegian Cruise Line Holdings Inc. (NCLH, Financial), Schlumberger Ltd. (SLB, Financial), Littelfuse Inc. (LFUS, Financial), Lydall Inc. (LDL, Financial) and Integra Lifesciences Holdings Corp. (IART, Financial) during the quarter.
Norwegian Cruise Line Holdings
The guru invested in 95,000 shares of Norwegian Cruise Line, dedicating 0.83% of the equity portfolio to the holding. The stock traded for an average price of $55.60 per share during the quarter.
The Miami-based cruise line operator has a $10.65 billion market cap; its shares were trading around $49.44 on Thursday with a price-earnings ratio of 11.32, a price-book ratio of 1.84 and a price-sales ratio of 1.79.
The Peter Lynch chart shows the stock is trading below its fair value, suggesting it is undervalued.
GuruFocus rated Norwegian’s financial strength 5 out of 10. As a result of issuing approximately $248.68 million in new long-term debt over the past three years, the company has poor interest coverage. In addition, the Altman Z-Score of 1.35 warns it is at risk of going bankrupt.
The company’s profitability and growth fared much better, scoring a 9 out of 10 rating. In addition to an expanding operating margin, Norwegian is supported by strong returns that outperform over half of its competitors, consistent earnings and revenue growth and a high Piotroski F-Score of 8, which indicates it has healthy business conditions. The company 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 annum over a 10-year period.
Of the gurus invested in Norwegian, PRIMECAP Management (Trades, Portfolio) has the largest stake with 2.55% of outstanding shares. Other top guru shareholders include Barrow, Hanley, Mewhinney & Strauss, Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Ron Baron (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio) and First Pacific Advisors (Trades, Portfolio).
Schlumberger
After exiting a position in Schlumberger in the second quarter of 2014, Olstein entered a new 125,000-share holding. The trade had an impact of 0.80% on the equity portfolio. Shares traded for an average price of $40.35 during the quarter.
The oilfield services provider, which is headquartered in Houston, has a market cap of $55.28 billion; its shares were trading around $39.97 on Thursday with a price-earnings ratio of 26.65, a price-book ratio of 1.54 and a price-sales ratio of 1.69.
According to the Peter Lynch chart, the stock is overvalued.
Schlumberger’s financial strength and profitability and growth were both rated 5 out of 10 by GuruFocus. While the company has adequate interest coverage, the Altman Z-Score of 2.26 suggests it is under some fiscal pressure.
Although the company’s operating margin has declined over the past five years, it still outperforms 60% of industry peers. While Schlumberger has a moderate Piotroski F-Score of 6, indicating business conditions are stable, its revenue per share has been declining for several years. 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 3.91% of outstanding shares, Dodge & Cox is the company’s largest guru shareholder. Other top guru investors include First Eagle Investment (Trades, Portfolio), Barrow, Hanley, Mewhinney & Strauss, Ken Fisher (Trades, Portfolio), Simons’ firm, Charles de Vaulx (Trades, Portfolio), Cohen, Mairs and Power (Trades, Portfolio), PRIMECAP, John Rogers (Trades, Portfolio), Pioneer, David Carlson (Trades, Portfolio) and the IVA International Fund (Trades, Portfolio).
Littelfuse
Having previously closed a position in Littelfuse in second-quarter 2014, the investor opened a new 21,300-share holding, giving it 0.61% space in the equity portfolio. During the quarter, the stock traded for an average price of $181.47 per share.
The Chicago-based manufacturer of electronic components has a $4.18 billion market cap; its shares were trading around $169.14 on Thursday with a price-earnings ratio of 25.86, a price-book ratio of 2.80 and a price-sales ratio of 2.50.
Based on the Peter Lynch chart, the stock appears to be overvalued.
GuruFocus rated Littelfuse’s financial strength 6 out of 10. Although the company has issued approximately $297.82 million in new long-term debt over the last three years, it is at a manageable level as a result of sufficient interest coverage. In addition, the Altman Z-Score of 4.23 suggests it is in good fiscal health.
The company’s profitability and growth scored an 8 out of 10 rating. Although the operating margin is in decline, it still outperforms more than 75% of competitors. It is also supported by stable returns, steady earnings and revenue growth and a moderate Piotroski F-Score of 5. Littelfuse also has a 3.5-star business predictability rank.
Fisher is the company’s largest guru shareholder with 2.13% of outstanding shares. Rogers, Mairs and Power (Trades, Portfolio), Baron, Mario Gabelli (Trades, Portfolio), Chuck Royce (Trades, Portfolio), Pioneer, Simons’ firm and Greenblatt also have positions in the stock.
Lydall
Olstein picked up 60,000 shares of Lydall, allocating 0.20% of the equity portfolio to the position. The stock traded for an average per-share price of $21.78 during the quarter.
Based in Manchester, Connecticut, the manufacturer of engineered products for the industrial and automotive industries has a market cap of $413.82 million; its shares were trading around $23.60 on Thursday with a price-earnings ratio of 14.34, a price-book ratio of 1.09 and a price-sales ratio of 0.50.
The Peter Lynch chart shows the stock is trading near its fair value.
Weighed down by weak interest coverage and poor earnings quality, Lydall’s financial strength was rated 5 out of 10 by GuruFocus. In addition, the Altman Z-Score of 2.34 suggests the company is under some fiscal stress.
The company’s profitability and growth fared a bit better, scoring a 7 out of 10 rating. In addition to operating margin expansion, Lydall is supported by a moderate Piotroski F-Score of 5. The one-star business predictability rank is on watch, however, as Lydall’s returns are underperforming over half of industry peers and its assets are building at a faster rate than its revenue is growting, suggesting it may be becoming less efficient.
Of the gurus invested in Lydall, Royce has the largest position with 1.74% of outstanding shares. Simons’ firm, Richard Snow (Trades, Portfolio) and Gabelli are also shareholders.
Integra Lifesciences
After selling out of Integra Lifesciences in the third quarter of 2015, the guru established a new 8,000-share holding. The trade expanded the equity portfolio by 0.07%. During the quarter, shares traded for an average price of $51.45.
The Plainsboro, New Jersey-based company, which manufactures surgical and medical instruments, has a $5.42 billion market cap; its shares were trading around $63.89 on Thursday with a price-earnings ratio of 54.64, a price-book ratio of 3.85 and a price-sales ratio of 3.67.
According to the Peter Lynch chart, the stock is overvalued.
GuruFocus rated Integra’s financial strength 5 out of 10. As a result of issuing approximately $695.26 million in new long-term debt over the last three years, it has poor interest coverage. In addition, the Altman Z-Score of 2.76 indicates the company is under some fiscal pressure as its revenue per share growth has slowed down over the last 12 months.
The company’s profitability and growth scored a 7 out of 10 rating. Although the margins and returns are underperforming competitors, Integra is supported by a moderate Piotroski F-Score of 5 and a one-star business predictability rank.
With 0.91% of outstanding shares, Fisher is Integra’s largest guru shareholder. Greenblatt, Cohen, Pioneer and Paul Tudor Jones (Trades, Portfolio) also hold the stock.
Additional trades
During the quarter, Olstein also boosted several positions, including UnitedHealth Group Inc. (UNH, Financial), Zebra Technologies Corp. (ZBRA, Financial), Dow Inc. (DOW, Financial), Aptiv PLC (APTV, Financial) and Walgreens Boots Alliance Inc. (WBA, Financial), among others.
The guru’s $617 million equity portfolio, which is composed of 111 stocks, is heavily invested in the consumer cyclical, financial services and industrials sectors.
According to its fact sheet, the Olstein All Cap Value Fund returned -10.99% in 2018. Its benchmark, the Russell 3000 Index, posted a -5.24% return.
Disclosure: No positions.
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