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Sydnee Gatewood
Sydnee Gatewood
Articles (956) 

Tom Gayner Buys 6 Stocks in 2nd Quarter

Guru’s largest new position is Bank of New York Mellon

Tom Gayner (Trades, Portfolio), the co-CEO of Markel Corp., disclosed six new positions in his second-quarter portfolio, which was released last week.

Concentrating on promising areas where Markel has good understanding and knowledge, the guru’s Virginia-based firm uses a value-oriented approach to stock picking. Gayner also maintains a margin of safety within the investment portfolio and believes that because a stock is part of a business, it is worth the present value of future cash flows.

Based on these guidelines, the guru established positions in Bank of New York Mellon Corp. (NYSE:BK), Trupanion Inc. (NASDAQ:TRUP), Anheuser-Busch InBev SA/NV (NYSE:BUD), Ball Corp. (NYSE:BLL), Goodyear Tire & Rubber Co. (NASDAQ:GT) and Lennar Corp. (NYSE:LEN) during the quarter.

Bank of New York Mellon

Having previously closed a position in Bank of New York Mellon in the first quarter of 2014, the investor opened a new 80,000-share holding, allocating it to 0.05% of the equity portfolio. The stock traded for an average price of $46.99 per share during the quarter.

The New York-based bank has a $43.39 billion market cap; its shares were trading around $46.03 on Monday with a price-earnings ratio of 11.96, a price-book ratio of 1.16 and a price-sales ratio of 2.91.

The Peter Lynch chart shows the stock is trading below its fair value, suggesting it is undervalued.

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As a result of issuing approximately $12.6 billion in new long-term debt over the past three years, GuruFocus rated the bank’s financial strength 4 out of 10.

Weighed down by margins and returns that underperform competitors, the company’s profitability and growth scored a 3 out of 10 rating. It also has a business predictability rank of one out of five stars. According to GuruFocus, companies with this rank typically see their stocks gain an average of 1.1% per annum over a 10-year period.

Of the gurus invested in the bank, Warren Buffett (Trades, Portfolio) has the largest stake with 8.45% of outstanding shares. Other top guru shareholders include Dodge & Cox, First Eagle Investment (Trades, Portfolio), Chris Davis (Trades, Portfolio), Barrow, Hanley, Mewhinney & Strauss, Bill Nygren (Trades, Portfolio), Tweedy Browne (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Yacktman Asset Management (Trades, Portfolio) and Charles Brandes (Trades, Portfolio).

Trupanion

The guru invested in 25,000 shares of Trupanion, dedicating 0.01% of the equity portfolio to the holding. During the quarter, the stock traded for an average price of $32.82 per share.

The pet insurance company, which is headquartered in Seattle, has a market cap of $1.09 billion; its shares were trading around $31.45 on Monday with a price-book ratio of 8.24 and a price-sales ratio of 3.21.

According to the median price-sales chart, the stock is overvalued because it is trading above its historical average.

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Trupanion’s financial strength was rated 7 out of 10 by GuruFocus. Although the company has poor earnings quality and has issued approximately $13.67 million in new long-term debt over the last three years, the robust Altman Z-Score of 7.86 indicates it is good financial standing.

The company’s profitability and growth did not fare as well, scoring a 2 out of 10 rating. Although the operating margin is expanding, it underperforms a majority of industry peers. Trupanion is also weighed down by negative returns and declining revenue per share. It has a moderate Piotroski F-Score of 4, which implies business conditions are stable.

With 0.99% of outstanding shares, Chuck Royce (Trades, Portfolio) is the company’s largest guru shareholder. Paul Tudor Jones (Trades, Portfolio) also holds the stock.

Anheuser-Busch InBev

After exiting a position in Anheuser-Busch InBev in fourth-quarter 2015, Gayner entered a new 3,000-share holding. Shares traded for an average price of $85.78 during the quarter.

The St. Louis-based brewing company has a $195.1 billion market cap; its shares were trading around $100.19 on Monday with a price-earnings ratio of 27.92, a price-book ratio of 2.92 and a price-sales ratio of 3.86.

Based on the Peter Lynch chart, the stock appears to be overvalued.

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GuruFocus rated Anheuser-Busch’s financial strength 3 out of 10 as a result of a weak cash-debt ratio of 0.07. The low Altman Z-Score of 1.31 warns the company could be at risk of going bankrupt.

The brewer’s profitability and growth scored a 5 out of 10 rating. While the operating margin is negative and underperforms a majority of competitors, Anheuser-Busch is supported by a stable return on equity ratio of 18.54% and a moderate Piotroski F-Score of 4. The company’s one-star business predictability rank is on watch as a result of a slowdown in revenue per share growth over the last 12 months.

Ken Fisher (Trades, Portfolio) is the company’s largest guru shareholder with 0.35% of outstanding shares. Other top guru investors include Lee Ainslie (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Jim Simons' (Trades, Portfolio) Renaissance Technologies, Pioneer Investments (Trades, Portfolio), George Soros (Trades, Portfolio) and Philippe Laffont (Trades, Portfolio).

Ball Corp.

The guru picked up 3,000 shares of Ball Corp. The stock traded for an average per-share price of $62.05 during the quarter.

Based in Broomfield, Colorado, the company, which manufactures glass Mason jars and other packaging products, has a market cap of $25.02 billion; its shares were trading around $74.73 on Monday with a price-earnings ratio of 56.87, a price-book ratio of 7.05 and a price-sales ratio of 2.20.

The Peter Lynch chart suggests the stock is overvalued.

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Weighed down by poor interest coverage, Ball’s financial strength was rated 5 out of 10 by GuruFocus. In addition, the Altman Z-Score of 2.48 indicates the company is under some financial pressure.

The company’s profitability and growth fared better, scoring a 7 out of 10 rating. Although the operating margin is in decline, it still outperforms over half of industry peers. Ball is also supported by a moderate Piotroski F-Score of 6, consistent earnings and revenue growth and a 2.5-star business predictability rank. GuruFocus says companies with this rank typically see their stocks gain an average of 7.3% per year.

Of the gurus invested in Ball, Dodge & Cox has the largest stake with 0.69% of outstanding shares. Pioneer, First Eagle, Joel Greenblatt (Trades, Portfolio) and Cohen are also shareholders.

Goodyear

Having previously sold out of Goodyear Tire & Rubber in the third quarter of 2018, Gayner purchased a new 20,000-share holding. During the quarter, the stock traded for an average price of $16.90 per share.

The Akron, Ohio-based tire manufacturer has a $2.96 billion market cap; its shares were trading around $12.39 on Monday with a price-earnings ratio of 6.49, a price-book ratio of 0.59 and a price-sales ratio of 0.20.

According to the Peter Lynch chart, the stock is undervalued.

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Goodyear’s financial strength and profitability and growth were both rated 5 out of 10 by GuruFocus. As a result of issuing approximately $494 million in new long-term debt over the past three years, the company has poor interest coverage. In addition, the Altman Z-Score of 1.75 warns the company could be in danger of bankruptcy because its revenue per share has declined for the past five years.

While the operating margin is expanding, it still underperforms over half of its competitors. The company also has poor returns, but is supported by a moderate Piotroski F-Score of 5 and a one-star business predictability rank.

With 3.68% of outstanding shares, Hotchkis & Wiley is Goodyear’s largest guru shareholder. Other top guru investors are Ainslie, Simons’ firm, Jones, Pioneer, Greenblatt and Gabelli.

Lennar

After divesting of a position in Lennar in the fourth quarter of 2011, the investor purchased a new 4,900-share holding. Shares traded for an average price of $51.55 during the quarter.

The homebuilder, which is headquartered in Miami, has a market cap of $14.87 billion; its shares were trading around $47.47 on Monday with a price-earnings ratio of 8.11, a price-book ratio of 1.01 and a price-sales ratio of 0.71.

Based on the Peter Lynch chart, the stock appears to be undervalued.

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As a result of a low cash-debt ratio of 0.09, GuruFocus rated Lennar’s financial strength 5 out of 10. The Altman Z-Score of 2.8 suggests the company is under minor financial stress.

The company’s profitability and growth scored an 8 out of 10 rating. Although the operating margin is in decline, it still outperforms a majority of industry peers. Lennar is also supported by strong returns, a moderate Piotroski F-Score of 6 and a one-star business predictability rank.

Glenn Greenberg (Trades, Portfolio) is the company’s largest guru shareholder with 1.52% of outstanding shares. Other gurus who have positions in the stock include Barrow, Hanley, Mewhinney & Strauss, Third Avenue Management (Trades, Portfolio), Fisher, the Smead Value Fund (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio), Pioneer, Caxton Associates (Trades, Portfolio), Cohen, Ron Baron (Trades, Portfolio), Ken Heebner (Trades, Portfolio), Jones, Scott Black (Trades, Portfolio), Greenblatt and Murray Stahl (Trades, Portfolio).

Additional trades

During the quarter, Gayner also added several holdings, including Goldman Sachs Group Inc. (NYSE:GS), NVR Inc. (NYSE:NVR), The Scotts Miracle Gro Co. (NYSE:SMG) and American Express Co. (NYSE:AXP).

The guru’s $6.5 billion equity portfolio, which is composed of 137 stocks, is largely invested in the financial services and consumer cyclical sectors.

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Disclosure: No positions.

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About the author:

Sydnee Gatewood
I am the editorial director at GuruFocus. I have a BA in journalism and a MA in mass communications from Texas Tech University. I have lived in Texas most of my life, but also have roots in New Mexico and Colorado. Follow me on Twitter! @gurusydneerg

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