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James Li
James Li
Articles (866)  | Author's Website |

John Rogers Tones Down PCTEL Stake

Guru real-time pick highlight

September 10, 2019 | About:

According to GuruFocus Real-Time Picks, a Premium feature, Ariel Investment Founder John Rogers (Trades, Portfolio) disclosed on Tuesday he trimmed his holding of PCTEL Inc. (PTCI) on Aug. 31. 

Managing approximately $12.9 billion in total assets, Rogers seeks small- and mid-cap companies with one or more of the following: high barriers to entry, sustainable competitive advantages, predictable fundamentals and low valuations. The fund manager said in his second-quarter shareholder letter that Ariel Fund returned 0.77% for the three months ended June 30, underperforming the Russell 2500 Value Index return of 1.89% and the Russell 2500 Index return of 2.96%.

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As of quarter-end, Ariel Investment’s $7.96 billion equity portfolio contains 153 stocks, of which five represent new holdings. The top three sectors in terms of weight are financial services, consumer cyclical and technology.

Trade details and company background

Rodgers disclosed a holding of 746,239 shares, down 27.58% from his stake of 1,030,471 shares at quarter-end. While shares averaged $4.95 during the second quarter, PCTEL traded at $6.82 on Aug. 31.

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The Bloomingdale, Illinois-based company operates two business segments: Connected Solutions and RF Solutions. PCTEL’s Connected Solutions segment designs and manufactures precision antennas, while the RF Solutions segment offers a wide range of in-house wireless product development capabilities, including design, testing, radio integration and manufacturing.

Company's financial strength and position

PCTEL listed in its 2018 annual report several risks that can affect its financial position, including competition within the wireless product industry and geopolitical factors involving countries where it operates.

While the company said it will transition its high-volume manufacturing from its Tianjin facility to contract manufactures in China and elsewhere, PCTEL still warned that the ongoing trade war between the U.S. and China could result in increased tariff costs on the company’s products imported to or exported from China.

GuruFocus ranks PCTEL’s financial strength 7.8 out of 10 on several positive indicators, which include a strong Altman Z-score of 6.03 and a debt-to-equity ratio that outperforms 93.85% of global competitors.

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Company earnings summary

PCTEL said on Aug. 8 that revenues for the second quarter were $23.5 million, up 9% from the prior-year quarter primarily due to strong growth in the company’s test and measurement product lines. The strong revenue contributed to gross margins of 45.5% for the quarter, up 9.4% from the prior-year quarter.

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See also

Other gurus with positions in PCTEL include Jim Simons (Trades, Portfolio)' Renaissance Technologies and 2019 Value Conference Keynote Speaker Chuck Royce (Trades, Portfolio).

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Rogers’ top five holdings as of the June quarter are Microsoft Corp. (NASDAQ:MSFT), Philip Morris International Inc. (NYSE:PM), First American Financial Corp. (NYSE:FAF), Lazard Ltd. (NYSE:LAZ) and Kennametal Inc. (NYSE:KMT).

Disclosure: No positions.

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About the author:

James Li
I am an editorial assistant and researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

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