Spiros Segalas (Trades, Portfolio), portfolio manager of the Harbor Capital Appreciation Fund, disclosed this week his top five buys for the third quarter were The Walt Disney Co. (DIS, Financial), SAP SE (SAP, Financial), Xilinx Inc. (XLNX, Financial), Exact Sciences Corp. (EXAS, Financial) and Uber Technologies Inc. (UBER, Financial).
Segalas seeks investments in mid-cap and large-cap companies using a bottom-up investing approach. The fund looks for companies with strong earnings growth, improving sales momentum, improving profitability and strong balance sheets.
As of quarter-end, the $30.16 billion equity portfolio contains 59 stocks, of which eight represent new holdings. The portfolio, which has a turnover ratio of 7%, has a 41.88% weight in technology, followed by a 23.53% weight in consumer cyclical and an 11.89% weight in financial services.
Disney
Segalas purchased 3,206,914 shares of Disney, giving the position 1.52% equity portfolio weight. Shares averaged $138.40 during the quarter.
Netflix Inc. (NFLX, Financial) discussed in its third-quarter shareholder letter, which the Los Gatos, California-based company released Wednesday, that the upcoming arrival of rival streaming services, including Disney’s Disney+, might increase competition on the streaming front and impact near-term growth. Despite this, the stock climbed over 9% in after-hours trading on the heels of reporting earnings of $1.47 per share during the quarter, outperforming the Refinitiv estimate of $1.04 per share.
GuruFocus ranks Disney’s profitability 9 out of 10 on several positive investing signs, which include a four-star business predictability rank and operating margins that have increased approximately 3.10% per year on average over the past five years and are outperforming 84.37% of global competitors. Despite this, Disney has a weak Piotroski F-score of 3.
Segalas added a meager 56,036 shares of Netflix during the quarter, increasing the holding by just 1.78%. Despite this, the stock still represents one of Segalas’ top 10 holdings as of quarter-end. While shares averaged $355.61 during the third quarter, shares reached a post-close high of $317.50 on Wednesday following the company’s earnings release.
Other gurus with holdings in Disney include Yacktman Asset Management (Trades, Portfolio) and Pioneer Investments (Trades, Portfolio).
SAP
Segalas purchased 2,180,859 shares of SAP, giving the position 0.89% weight in the equity portfolio. Shares averaged $129.59 during the quarter.
The Walldorf, Germany-based company provides software solutions for enterprise resource planning, database management, business intelligence and vertical-specific software. GuruFocus ranks SAP’s profitability 9 out of 10 on several positive investing signs, which include consistent revenue growth and operating margins that are outperforming 87.80% of global competitors despite languishing near a 10-year low of 20.67%.
Xilinx
Segalas purchased 1,484,072 shares of Xilinx, giving the position 0.56% equity portfolio space. Shares averaged $113.50 during the quarter.
The San Jose, California-based company designs programmable logic devices. Xilinx’s chips are used in various devices for the communications, data processing, industrial, consumer and automotive products.
GuruFocus ranks Xilinx’s profitability 9 out of 10 on several positive indicators, which include returns that are near a 10-year high and outperform over 95% of global competitors. Additionally, operating margins are outperforming 94.98% of global semiconductor companies despite contracting approximately 1.3% per year on average over the past five years.
Exact Sciences
Segalas purchased 1,400,187 shares of Exact Sciences, giving the position 0.53% equity portfolio weight. Shares averaged $108.77 during the quarter.
The Madison, Wisconsin-based company focuses on the early detection and prevention of certain cancers. According to GuruFocus, Exact Sciences’ cash-to-debt ratio of 1.54% underperforms 53.96% of global competitors, while its debt-to-equity ratio of 1.05% underperforms 85.25% of global medial research companies. Despite this, Exact Sciences has a strong Altman Z-score of 6.8.
Uber
Segalas said in his second-quarter shareholder letter that the fund established a position in Uber, a company that has lead the ride-sharing industry, an industry that formed into a “transformational growth sector” of the global consumer market over the past five years. The fund purchased 3,466,861 shares, giving the position 0.48% weight in the equity portfolio. Shares of Uber averaged $42.93 during the September quarter.
Disclosure: No positions.
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