Jeffrey Ubben is the founder, chief executive officer and the chief investment officer of ValueAct Holding LP.
The portfolio is composed of 15 stocks and has a total value of $18,092 million at the end of 2015 Q1. During that quarter, the investor bought 2 new stocks: Precision Castparts Corp (PCP) and Wesco International Inc (WCC).
Precision Castparts Corp (PCP)
The company has a market cap of $29.25 billion and is a manufacturer of complex metal components and products, provides high-quality investment castings, forgings and fasteners/fastener systems for critical aerospace and and power applications. It also provides investment castings and forgings for general industrial, armament, medical and other applications.
PCP has positive returns (ROE of 13.30% and ROA of 7.91%) that are ranked higher than 76% of other companies of the Global Metal Fabrication industry. Its financial strength is rated 8/10, even so the cash to debt ratio is ranked lower than 89% of its competitors.
The company has a steady growth rate. Over the last 5 years, revenue grew by 13.20%, EBITDA by 15.00% and earnings grew by 12.90%. However, due to reduced demand in the industrial market, weather impacts and foreign exchange headwinds that weighed heavily on their results, they had a challenging start to the year.
Their organic sales for workday grew 3% sales momentum decelerated through the quarter. Solid sales growth in construction, utility in CIG offset decline in industrial and as a result, profitability was negatively impacted and was down versus the prior year. Free cash flow generation was strong and they further improved their financial leverage in the quarter. Their capital structure is in good shape and the acquisition pipeline remains robust with an excellent list of opportunity to strengthen their electrical core and further expand their portfolio products and services this year.
Decline in global oil, gas and other commodity prices present uncertainty for the global economy, but they optimize broader GDP expansion opportunities across our diversified customer base and they expect reduced demand in commodity driven industrial and market and foreign exchange headwind to continue.
As a result, they are taking additional actions to accelerate their One WESCO sales initiative and simplifying streamline of business, the second quarter is having off to a slow start. Their strategy for One WESCO continues to drive their long term value proposition particularly for customers looking to reduce their supply chain costs.
Jeff Ubben (Trades, Portfolio) is not the only guru that bought the company during the first quarter of the year. Lou Simpson (Trades, Portfolio), Bill Nygren (Trades, Portfolio), Daniel Loeb (Trades, Portfolio), George Soros (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio) did the same, while RS Investment Management (Trades, Portfolio) sold out all its shares.
Wesco International Inc (WCC)
The company has a market cap of $3.18 billion and is a provider of electrical, industrial, and communications maintenance, repair and operating (MRO) and original equipment manufacturers (OEM) products, construction materials, and advanced supply chain management and logistics services.
WCC has positive returns (ROE of 14.51% and ROA of 5.67%) that are ranked higher than 77% of other companies of the Global Industrial Distribution industry. Its financial strength is rated 7/10.
The company had positive growth rate over the last 5 years, with revenue that grew by 7.10% but even here, the year didn’t start well. They had sharp declines in volume, price and mix because their customers are very cautious in buying due to their uncertainties and their outlook and demand.
The company believes that they have aligned their costs much better moving forward certainly than they have been in last two or three quarters.
Apart from oil and gas, they continue to see positive trends developing in their commercial aero with the future ramp ups coming on the 787, both narrow-bodies and the A350 ramping up through this year and the next year that goes in the higher rates of production and they will continue to see increasing activity on the new engine programs .
IGT continues to be a strong growth driver for them. These two end market dynamics were key components of a strong year-on-year margin expansion in investment cast products and airframes.
In Q1, Gurus Chris Davis (Trades, Portfolio) and Jim Simons (Trades, Portfolio) bought WCC; Alan Fournier (Trades, Portfolio), NWQ Managers (Trades, Portfolio) and Steven Cohen (Trades, Portfolio) sold their shares, and Robert Olstein (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Scott Black (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio) increased their stakes.
