Chris Davis (Trades, Portfolio) leads Davis Advisors, an employee-owned investment firm founded in 1969. The firm takes a long-term investing approach, paying careful attention to valuations.
According to Davis Advisors’ website, the firm’s roots trace back to Shelby Cullum Davis, who took an initial investment of $100,000 in the 1940s, and ended his career in the 1990s with more than $800 million.
Today, the firm offers a variety of mutual funds, such as the International Fund, the Global Fund, and the Opportunity Fund.
During the fourth quarter, the firm purchased 14 new holdings. The following are the five largest new positions in order of portfolio impact.
Public Storage (PSA, Financial)
Davis’ largest purchase was 90,917 shares in Public Storage at an average price of $180.92 per share. The purchase had a 0.05% impact on the portfolio.
The company owns and operates self-storage facilities that are leased on a month-to-month basis for personal and business use.
The stock has been up 24% over the past year and currently trades at $203.26. The DCF model estimates a fair value of $130.27, giving a margin of safety of -57%.
Diluted EPS for FY 2013 was $4.89, which has grown consistently since FY 2010.
Public Storage’s operating margin has also been steadily expanding, recording at 48.57% in FY 2013.
The company has a weak balance sheet with a current ratio of 0.37. This is calculated by dividing current assets by current liabilities. A ratio of less than 1 indicates the company cannot cover its short-term obligations. Long-term debt also increased to $839 million in FY 2013.
McGraw Hill Financial (MHFI, Financial)
Davis purchased 182,000 shares of McGraw Hill for an average price of $87.76 per share.
McGraw Hill is a financial information and education company that offers information on capital and commodities markets and commercial markets services. Its four operating segments are Standard & Poor's Ratings (S&P Ratings), S&P Capital IQ, S&P Dow Jones Indices (S&P DJ Indices) and Commodities & Commercial (C&C).
The stock has been up 24% over the past year and may be overvalued according to the Peter Lynch chart.
The company’s dividend yield is 1.2% — close to the five-year low. The payout ratio is 36%, while the growth rate over the past five years is 5.3%.
The current P/E ratio is 31.1, while the P/S ratio is 5.3.
iShares S&P 500 Value Index ETF (IVE, Financial)
Davis also purchased 165,396 shares of this ETF at an average price of $90.36 per share. The graph below shows Davis’ holding history of the ETF.
The price has increased 13% over the past year and currently trades at $94.37.
Endurance International Group Holdings (EIGI, Financial)
Davis bought 902,181 shares of Endurance International at an average price of $16.41 per share.
The company is a provider of cloud-based solutions for small businesses. Its brands include bluehost.com, justcloud.com, and SEO Gears.
Endurance launched its IPO in October 2013 and raised $252 million. The stock has been up 38% over the past year.
A Boston Globe article from October 2013 quotes Endurance’s CEO as saying one of the goals of the IPO was to raise enough money to improve the balance sheet and pay down debt. This is certainly a wise idea since the current ratio is 0.27 and long-term debt stands at $1,036 million.
RS Investment Management (Trades, Portfolio) also holds 0.16% of Endurance’s outstanding shares.
Davis purchased 158,243 shares of Chubb for an average price of $99.48 per share.
Chubb is the holding company for several property and casualty insurance companies. Its three business segments are Chubb Personal Insurance, Chubb Commercial Insurance, and Chubb Specialty Insurance.
The stock has been up 19% over the past year and is undervalued when comparing the price to the Peter Lynch earnings line.
Diluted EPS for FY 2013 was $9.04, which has grown 6% over the past five years.
The current P/E ratio is 11.9 and the P/S ratio is 1.78.
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