Activist investor releases 3rd-quarter portfolio
Elliott Management leader Paul Singer disclosed that he established six new positions when he released his third-quarter portfolio earlier this week.
As a well-known activist investor, the guru’s New York-based firm takes large stakes in underperforming companies and then encourages management to implement changes that will improve performance and profitability.
Paul Singer is an activist investor and the founder and CEO of hedge fund Elliott Management Corporation. (AP Photo/John Minchillo, File) ASSOCIATED PRESS
During the quarter, Singer started positions in FirstEnergy Corp., Nielsen Holdings PLC, LogMeIn Inc., Community Health Systems Inc., Sabre Corp. and Mitek Systems Inc..
FirstEnergy
The guru’s largest new buy of the quarter was a 25.04 million-share stake in FirstEnergy, giving it 4.15% space in the equity portfolio. He paid an average of $36.54 per share.
The Ohio-based electric utility company has a market cap of $19.85 billion; its shares were trading around $39.18 on Friday with a forward price-earnings ratio of 15.53, a price-book ratio of 2.92 and a price-sales ratio of 1.25.
The median price-sales chart shows the stock is trading above its historical value.
GuruFocus rated FirstEnergy’s financial strength 4 out of 10. As a result of issuing new long-term debt and recording a decline in revenue per share over the last several years, the Altman Z-Score of 0.49 warns the company is at risk of going bankrupt. The company’s profitability and growth scored a 6 out of 10 rating, boosted by an expanding operating margin, a moderate Piotroski F-Score of 6, which indicates conditions are stable, and a business predictability rank of one out of five stars. According to GuruFocus, companies with this rank typically see their stock prices gain an average of 1.1% per year.
With his purchase of 4.9% of FirstEnergy’s outstanding shares, Singer became its largest guru shareholder. Jim Simons‘ Renaissance Technologies, Sarah Ketterer, NWQ Managers, Steven Cohen, Pioneer Investments, George Soros, Joel Greenblatt, Mario Gabelli, Louis Moore Bacon, David Dreman and John Hussman also hold the stock.
Nielsen
Singer invested in 5 million shares of Nielsen for an average price of $26.92 per share, allocating 0.62% of the equity portfolio to the stake.
Headquartered in New York, the global information, data and measurement company has a $9.16 billion market cap; its shares were trading around $25.79 on Friday with a price-earnings ratio of 28.98, a price-book ratio of 2.28 and a price-sales ratio of 1.39.
According to the Peter Lynch chart, the stock is overpriced since it is trading higher than its fair value.
Nielsen’s financial strength was rated 4 out of 10 by GuruFocus. Due to issuing approximately $955 million in new long-term debt over the last three years, the Altman Z-Score of 1.09 warns the company is in danger of going bankrupt. The company’s profitability and growth fared better, scoring a 7 out of 10 rating as a result of an expanding operating margin, stable returns and a moderate Piotroski F-Score of 5.
Of the gurus invested in Nielsen, Barrow, Hanley, Mewhinney & Strauss has the largest position with 3.69% of outstanding shares. During the quarter, the T Rowe Price Equity Income Fund, Leon Cooperman, John Paulson, Jeremy Grantham and Greenblatt also established holdings. Tom Russo, Pioneer, Jerome Dodson, Glenn Greenberg and John Rogers are also shareholders.
LogMeIn
Having divested a position in LogMeIn in the third quarter of 2017, the investor established a new 1.2 million-share holding for an average price of $90.43 per share. The trade had an impact of 0.49% on the equity portfolio.
The Boston-based software company has a $4.43 billion market cap; its shares were trading around $87.43 on Friday with a price-earnings ratio of 31.74, a price-book ratio of 1.48 and a price-sales ratio of 3.86.
Based on the Peter Lynch chart, the stock appears to be overpriced.
LogMeIn’s financial strength and profitability and growth were both rated 7 out of 10 by GuruFocus. Strengthened by sufficient interest coverage, the Altman Z-Score of 3.03 indicates the company is in good financial standing. While the gross margin is in decline, the company is supported by a net margin that outperforms 79% of competitors, a moderate Piotroski F-Score of 5 and a one-star business predictability rank.
Singer is now the company’s largest guru shareholder with 2.39% of outstanding shares. Simons, Greenblatt, Ken Fisher and Pioneer are also shareholders.
Community Health Systems
Singer picked up 4.5 million shares of Community Health for an average price of $3.25 per share, dedicating 0.07% of the equity portfolio to the holding. He previously sold out of the stock in the first quarter of 2017.
The hospital operator, which is based in Franklin, Tennessee, has a market cap of $401.18 million; its shares were trading around $3.45 on Friday with a price-sales ratio of 0.03.
The median price-sales chart shows the stock is trading below its historical value.
Weighed down by extremely low interest coverage, GuruFocus rated Community Health’s financial strength 3 out of 10. In addition, the Altman Z-Score of 0.31 warns the company is in danger of bankruptcy. The company’s profitability and growth did not fare much better, scoring a 5 out of 10 rating due to a declining operating margin, a low Piotroski F-Score of 3, which suggests operations are in poor condition, and a one-star business predictability rank that is on watch as a result of declining revenue per share.
With 3.87% of outstanding shares, Singer is now the company’s largest guru shareholder. Other guru investors are Chuck Royce, Greenblatt and Ron Baron.
Sabre
The guru purchased 590,955 shares of Sabre for an average price of $25.67 per share, impacting the equity portfolio by 0.07%.
The Texas-based travel technology company, which provides global distribution systems for air bookings, has a $6.86 billion market cap; its shares were trading around $24.92 on Friday with a price-earnings ratio of 20.79, a price-book ratio of 7.42 and a price-sales ratio of 1.79.
According to the Peter Lynch chart, the stock is overvalued.
As a result of insufficient interest coverage and declining revenue per share, Sabre’s financial strength was rated 5 out of 10 by GuruFocus. In addition, the Altman Z-Score of 1.7 indicates the company is in danger of going bankrupt. The company’s profitability and growth scored a 7 out of 10 rating, driven by an expanding operating margin and a high Piotroski F-Score of 8, which suggests business conditions are healthy.
Ketterer is the company’s largest guru shareholder with 4.56% of outstanding shares. Simons, Pioneer, Greenblatt and Paul Tudor Jones are also invested in the stock.
Mitek Systems
Singer bought 294,855 shares of Mitek Systems for an average price of $8.
