Appaloosa Management leader David Tepper (Trades, Portfolio) disclosed three new holdings in his second-quarter portfolio, which was released earlier this week.
A distressed-debt specialist, Tepper has earned an international reputation for producing strong returns among Wall Street investors. Filings show the guru’s New Jersey-based hedge fund focuses on “equities and debt of distressed companies, exchange warrants, options, futures notes and junk bonds.”
Based on these criteria, Tepper established positions in Humana Inc. (HUM, Financial), Intelsat SA (I, Financial) and Centene Corp. (CNC, Financial) during the quarter.
Humana
The guru invested in 95,391 shares of Humana, allocating 0.27% of the equity portfolio to the holding.
The Louisville, Kentucky-based managed care company, which provides health insurance plans, has a $39.32 billion market cap; its shares were trading around $295.99 on Friday with a price-earnings ratio of 15.88, a price-book ratio of 3.31 and a price-sales ratio of 0.66.
The Peter Lynch chart shows the stock is trading slightly above its fair value, suggesting it is overpriced.
Human’s financial strength and profitability and growth were both rated 5 out of 10 by GuruFocus. Although the company has issued approximately $1.6 billion in new long-term debt over the past three years, its cash-debt ratio of 0.81 is outperforming over half of its competitors.
The company is also supported by strong returns, 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 annum over a 10-year period.
Of the gurus invested in Humana, Jim Simons (Trades, Portfolio)’ Renaissance Technologies has the largest stake with 2.18% of outstanding shares. Steven Cohen (Trades, Portfolio), Diamond Hill Capital (Trades, Portfolio), Chris Davis (Trades, Portfolio) and First Pacific Advisors (Trades, Portfolio) also established positions during the quarter, while Lee Ainslie (Trades, Portfolio), Ron Baron (Trades, Portfolio), Larry Robbins (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), the Vanguard Health Care Fund (Trades, Portfolio) and Pioneer Investments (Trades, Portfolio) added to their holdings. Paul Tudor Jones (Trades, Portfolio) is also a shareholder.
Intelsat
Tepper picked up 592,000 shares of Intelsat, dedicating 0.12% of the equity portfolio to the position. Shares traded for an average price of $19.40 during the quarter.
The satellite telecommunications company, which is headquartered in Luxembourg, has a market cap of $2.67 billion; its shares were trading around $18.27 on Friday with a price-sales ratio of 1.26.
According to the median price-sales chart, the stock is overvalued.
Weighed down by extremely low interest coverage, GuruFocus rated Intelsat’s financial strength 2.5 out of 10. In addition, the Altman Z-Score of -0.44 warns the company could be in danger of going bankrupt as its revenue per share has been in decline for the past five years.
The company’s profitability and growth did not fare much better, scoring a 4 out of 10 rating. Despite the operating margin being in decline, it still outperforms a majority of industry peers. Intelsat is also supported by a moderate Piotrsoki F-Score of 4, which indicates business conditions are stable.
With 0.99% of outstanding shares, Stanley Druckenmiller (Trades, Portfolio) is the company’s largest guru shareholder. George Soros (Trades, Portfolio), Mario Gabelli (Trades, Portfolio) and Greenblatt also own the stock.
Centene
After closing a position in Centene during the fourth quarter of 2018, the investor opened a new 127,815-share holding. The trade had an impact of 0.07% on the equity portfolio. During the quarter, the stock traded for an average per-share price of $53.96.
The St. Louis-based managed care company, which offers both private and government-sponsored health insurance, has a $19.85 billion market cap; its shares were trading around $48.23 on Friday with a price-earnings ratio of 15.78, a price-book ratio of 1.62 and a price-sales ratio of 0.29.
Based on the Peter Lynch chart, the stock appears to be slightly overvalued.
Centene’s financial strength was rated 6 out of 10 by GuruFocus. As a result of issuing approximately $2.6 billion in new long-term debt over the past three years, the company has poor interest coverage. In addition, the Altman Z-Score of 2.98 indicates it is under some financial pressure.
The company’s profitability and growth scored a 5 out of 10 rating on the back of a declining operating margin and returns that underperform over half of its competitors. Centene also has recorded steady earnings and revenue growth over the past several years, and has a moderate Piotroski F-Score of 5 as well as a three-star business predictability rank. GuruFocus says companies with this rank typically see their stocks gain an average of 8.2% per year.
Andreas Halvorsen (Trades, Portfolio) is Centene’s largest guru shareholder with 4.03% of outstanding shares. Richard Snow (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio) and Daniel Loeb (Trades, Portfolio) also established positions during the quarter, while Ainslie, Vanguard, Robbins, Simons’ firm, Greenblatt, Leon Cooperman (Trades, Portfolio), Jones and the Signature Select Canadian Fund (Trades, Portfolio) added to their holdings. Pioneer and John Hussman (Trades, Portfolio) also own the stock.
Additional trades
During the quarter, Tepper also boosted his positions in Alphabet Inc. (GOOG, Financial), Salesforce.com Inc. (CRM, Financial), Amazon.com Inc. (AMZN, Financial), the SPDR S&P Oil & Gas Explorations and Production Exchange-Traded Fund (XOP, Financial), UnitedHealth Group Inc. (UNH, Financial) and Adobe Inc. (ADBE, Financial).
The guru’s $9.23 billion equity portfolio, which is composed of 26 stocks, is largely invested in the technology sector.
Disclosure: No positions.
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