Third Point leader Daniel Loeb (Trades, Portfolio) released his second-quarter portfolio last week, listing 13 new positions.
Using an event-driven, value-oriented approach to picking stocks, Loeb is known to take activist positions in underperforming companies in order to unlock value.
The guru’s top five new buys for the quarter were NXP Semiconductors NV (NXPI, Financial), PayPal Holdings Inc. (PYPL, Financial), Campbell Soup Co. (CPB, Financial), Visa Inc. (V, Financial) and Dell-VMware tracking stock (DVMT, Financial).
NXP Semiconductors
Having previously exited a position in NXP in the first quarter, Loeb established a new 10.7 million-share stake for an average price of $110.33 per share, dedicating 8.18% of the equity portfolio to the stock.
The Dutch semiconductor manufacturer, whose acquisition deal with Qualcomm (QCOM, Financial) recently fell through, has a $32.56 billion market cap; its shares were trading around $94.10 on Monday morning with a price-earnings ratio of 33.65, a price-book ratio of 2.37 and a price-sales ratio of 3.49.
The Peter Lynch chart below shows the stock is trading higher than its fair value, suggesting it is overpriced.
Despite having low interest coverage and an Altman Z-Score that indicates the company is under some fiscal pressure, GuruFocus rated NXP’s financial strength 6 out of 10. The company’s profitability and growth scored a 7 out of 10 rating. While the operating margin outperforms only 51% of competitors, the high Piotroski F-Score of 7 implies the company has good business operations.
Of the gurus invested in NXP, Paul Singer (Trades, Portfolio) has the largest position with 4.77% of outstanding shares. Jim Simons (Trades, Portfolio)’ Renaissance Technologies, John Paulson (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), George Soros (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio) are also shareholders.
PayPal
The guru invested in 10 million shares of PayPal for an average price of $79.66 per share, allocating 5.8% of the equity portfolio to the stake.
The California-based company, which operates an online payments platform, has a market cap of $102.99 billion; its shares were trading around $87.57 on Monday morning with a price-earnings ratio of 51.79, a price-book ratio of 6.86 and a price-sales ratio of 7.29.
According to the Peter Lynch chart below, the stock is overpriced as it is trading above its fair value.
Supported by good interest coverage and a high Altman Z-Score of 3.3, PayPal’s financial strength was rated 7 out of 10 by GuruFocus. While the company has issued $11.1 billion in new long-term debt over the past three years, it is at a manageable level. The company’s profitability and growth scored an 8 out of 10 rating as its operating margin is expanding. In addition, it has a Piotroski F-Score of 6, which implies operating conditions are stable.
With 0.9% of outstanding shares, Steve Mandel (Trades, Portfolio) is the company’s largest guru shareholder. Other gurus who hold the stock include Spiros Segalas (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio), Pioneer, Steven Cohen (Trades, Portfolio), David Rolfe (Trades, Portfolio), Ken Fisher (Trades, Portfolio) and Leon Cooperman (Trades, Portfolio).
Campbell Soup
The investor picked up 5.5 million shares of Campbell Soup for an average price of $39.01 per share, giving the stake 1.57% space in the equity portfolio. He has since expanded the position, adding 11.5 million shares on Aug. 7.
The producer of canned soups and other packaged foods, which is headquartered in Camden, New Jersey, has a $12.28 billion market cap; its shares were trading around $40.85 on Monday morning with a price-earnings ratio of 25.69, a price-book ratio of 8.74 and a price-sales ratio of 1.52.
Based on the Peter Lynch chart below, the stock appears to be overpriced since it is trading higher than its fair value.
GuruFocus rated Campbell’s financial strength 4 out of 10. Although the company has issued $6.1 billion in new long-term debt over the past several years, it is still at a manageable level. The Altman Z-Score of 1.39, however, indicates the company is at risk of going bankrupt. The company’s profitability and growth fared a bit better, scoring a 7 out of 10 rating, boosted by an expanding operating margin, a moderate Piotroski F-Score of 6 and a business predictability ranking of three out of five stars. According to GuruFocus, companies with this rank typically see an average gain of 8.2% per year in stock price and have consistent revenue and earnings growth. The rank is also on watch, which means changes in its operations or industry may affect its performance.
With his purchase of 1.85% of outstanding shares, Loeb is Campbell’s largest guru shareholder. After the recent position expansion to 4.79% of the equity portfolio, he now holds 5.65% of outstanding shares. Manning & Napier Advisors, Pioneer, Joel Greenblatt (Trades, Portfolio) and David Dreman (Trades, Portfolio) are also shareholders.
Visa
Having previously closed a position in Visa in the fourth quarter of 2016, Loeb opened a new holding of 1.7 million shares for an average price of $128.67 per share. The trade had an impact of 1.57% on the equity portfolio.
The California-based credit card company has a market cap of $322.65 billion; its shares were trading around $140.73 on Monday morning with a price-earnings ratio of 34.49, a price-book ratio of 11.59 and a price-sales ratio of 16.47.
The Peter Lynch chart below shows the stock is trading above its fair value, suggesting it is overpriced.
Boosted by sufficient interest coverage and a high Altman Z-Score, Visa’s financial strength was rated 7 out of 10 by GuruFocus. The company’s profitability and growth scored a 9 out of 10 rating as its operating margin is expanding, it has a high Piotroski F-Score of 8 and a one-star business predictability ranking. GuruFocus said companies with this rank typically see an average gain of 1.1% in stock price per year.
Frank Sands (Trades, Portfolio) is the company’s largest guru shareholder with 0.85% of outstanding shares. Fisher, Warren Buffett (Trades, Portfolio), Segalas, PRIMECAP, Andreas Halvorsen (Trades, Portfolio) and Chuck Akre (Trades, Portfolio), along with many other gurus, also have positions in the stock.
Dell-VMware
The guru purchased 2 million shares of Dell-VMware tracking stock for an average price of $78.71 per share, expanding the equity portfolio by 1.18%. He previously sold out of the stock in the first quarter of the year.
The stock, which tracks the performance of Dell Technologies’ 80% stake in VMware (VMW, Financial), has an $18.82 billion market cap; the shares were trading around $94.40 on Monday with a price-earnings ratio of 29.97, a price-book ratio of 3.92 and a price-sales ratio of 2.33.
According to the price chart below, the stock has gained approximately 15% year to date.
In early July, the Round Rock, Texas-based technology company, which is private, announced it plans to acquire the publicly traded tracking stock. According to CNBC, the deal will eliminate the tracking stock but leave VMware unaffected. It will also give the company more direct control over VMware, with the possibility of a future merger.
With 7.13% of outstanding shares, Dodge & Cox has the largest position in the stock. Singer, Simons, Jeremy Grantham (Trades, Portfolio), Leucadia National (Trades, Portfolio), Jones, Michael Price (Trades, Portfolio) and Soros are also invested in the stock.
Other trades
During the quarter, Loeb also established positions in Deere & Co. (DE, Financial), Far Point Acquisition Corp. (FPAC, Financial) (FPAC.U, Financial), Energen Corp. (EGN, Financial), PVH Corp. (PVH), Camping World Holdings Inc. (CWH), Agilent Technologies Inc. (A) and Braskem SA (BAK).
The guru’s $14.3 billion portfolio, which consists of 38 stocks, is largely invested in the health care, technology and consumer cyclical sectors. According to GuruFocus, the New York-based firm’s Master Fund posted an 18.1% return in 2017, underperforming the S&P 500’s return of 21.71%.
Disclosure: No positions.
