Ronald Muhlenkamp (Trades, Portfolio), leader of Muhlenkamp & Co. Inc., disclosed he divested 17 positions from his portfolio in the first quarter.
With the goal of maximizing returns through capital appreciation, as well as income from dividends and interest, Muhlenkamp typically invests in highly profitable companies trading at a discount.
Among the biggest positions the guru cut from his portfolio during the quarter were Hanesbrands Inc. (HBI, Financial), Universal Display Corp. (OLED, Financial), Diana Shipping Inc. (DSXpB.PFD), Boardwalk Pipeline Partners LP (BWP, Financial) and Golar LNG Ltd. (GLNG, Financial).
Hanesbrands
Muhlenkamp sold his 475,778 remaining shares of Hanesbrands for an average price of $20.64 per share, impacting the portfolio by -2.94%. GuruFocus estimates the guru has gained 19% on the investment since the first quarter of 2013.
The North Carolina-based clothing company, best known for its underwear, has a market cap of $6 billion; its shares were trading around $16.64 on Monday with a price-earnings ratio of 83.20, a price-book ratio of 8.49 and a price-sales ratio of 0.92.
The Peter Lynch chart below shows the stock is trading above its fair value, suggesting it is overpriced.
Since the company has been issuing new debt over the past several years, GuruFocus rated Hanesbrands’ financial strength 4 out of 10. Its Altman Z-Score of 2.22 indicates it is under minor financial stress. Its profitability and growth was rated 7 of 10, boosted by an expanding operating margin, a moderate Piotroski F-Score of 6 and a one-star (out of five) business predictability rating.
Of the gurus invested in Hanesbrands, Barrow, Hanley, Mewhinney & Strauss has the largest position with 2.86% of outstanding shares. Diamond Hill Capital (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), John Hussman (Trades, Portfolio), Julian Robertson (Trades, Portfolio), David Dreman (Trades, Portfolio), Richard Snow (Trades, Portfolio) and George Soros (Trades, Portfolio) are also shareholders.
Universal Display
The guru dumped his remaining 42,240 shares of Universal Display, selling them for an average price of $150.32 per share. The trade had an impact of -2.15% on the portfolio. According to GuruFocus, since the second quarter of 2013, Muhlenkamp’s investment has generated an estimated gain of 153%.
The Trenton, New Jersey-based company, which manufactures organic light-emitting diode technologies, has a market cap of $4.62 billion; its shares were trading around $99.05 on Monday with a price-earnings ratio of 46.94, a price-book ratio of 7.21 and a price-sales ratio of 14.20.
According to the Peter Lynch chart below, the stock is overpriced as it is trading higher than its fair value.
Boosted by no debt and a strong Altman Z-Score, Universal Display’s financial strength was rated 9 out of 10 by GuruFocus. Its profitability and growth was rated 8 of 10 as the company has an expanding operating margin, a high Piotroski F-Score of 7 and a one-star business predictability rating.
With 1.45% of outstanding shares, PRIMECAP Management (Trades, Portfolio) is the company’s largest guru shareholder. Jim Simons (Trades, Portfolio), Pioneer, Chuck Royce (Trades, Portfolio), Caxton Associates (Trades, Portfolio) and Greenblatt also own the stock.
Diana Shipping
Muhlenkamp cashed in on 28,400 preferred shares of Diana Shipping for an average price of $24.14 per share, impacting the portfolio by -0.21%. He has made an estimated 35% on the investment since the third quarter of 2014.
The Greek dry-bulk shipping company has a market cap of $470.58 million; its regular shares (DSX, Financial) were trading around $4.40 on Monday with a price-book ratio of 0.74 and a price-sales ratio of 2.59.
Based on the Peter Lynch chart below, the stock appears to be overpriced as it is trading higher than its fair value.
Weighed down by debt, GuruFocus rated Diana Shipping’s financial strength 3 out of 10. In addition, the company’s Altman Z-Score of -1.22 indicates the company is at risk of going bankrupt. Diana’s profitability and growth did not fare much better, scoring a 4 of 10 rating. While its operating margin is in decline, it has a moderate Piotroski F-Score of 5 and a one-star business predictability rating.
No other gurus hold preferred shares.
Boardwalk Pipeline
The investor disposed of his remaining 52,200 shares of Boardwalk Pipeline for an average price of $11.87 per share. The transaction had an impact of -0.2% on the portfolio. GuruFocus data shows Muhlenkamp has lost an estimated 18% on the investment since the first quarter of 2014.
The Houston-based natural gas pipeline company has a market cap of $2.55 billion; its shares were trading around $10.20 on Monday with a price-earnings ratio of 9.53 and a price-sales ratio of 1.98.
The Peter Lynch chart below suggests the stock is undervalued as it is trading below its fair value.
Boardwalk’s financial strength and profitability and growth were both rated 4 out of 10 by GuruFocus. Because the company has been issuing new long-term debt in recent years, its interest coverage is low. In contrast, its operating margin outperforms 68% of competitors. In addition, the company has a one-star business predictability rating.
With 0.11% of outstanding shares, Simons is the company’s largest guru shareholder. Royce, Dreman and Murray Stahl (Trades, Portfolio) are also shareholders.
Golar LNG
Muhlenkamp sold his 15,900 remaining shares of Golar for an average price of $28.21 per share, impacting the portfolio by -0.14%. GuruFocus estimates the guru has gained approximately 63% on the investment since the first quarter of 2016.
Headquartered in Bermuda, the company, which transports liquefied natural gas, has a market cap of $3.39 billion; its shares were trading around $33.52 on Monday with a forward price-earnings ratio of 74.07, a price-book ratio of 1.97 and a price-sales ratio of 23.59.
According to the Peter Lynch chart below, the stock is overpriced as it is trading higher than its fair value.
Golar’s financial strength was rated 4 out of 10 by GuruFocus, weighed down by debt and an extremely low Altman Z-Score, which indicates the company could face bankruptcy in the near future. Its profitability and growth was rated 3 of 10 as its operating margin is negative and underperforms 96% of competitors. Its Piotroski F-Score of 6, however, suggests stable operating conditions. In addition, the company has a one-star business predictability rating.
Barrow, Hanley, Mewhinney & Strauss is the company’s largest guru shareholder with 6.57% of outstanding shares. Francisco GarcĂ Âa ParamĂ©s (Trades, Portfolio), Cohen, Private Capital (Trades, Portfolio), Bestinfond (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Pioneer also have positions in the stock.
Other trades
Muhlenkamp also exited positions in Cabot Oil & Gas Corp. (COG, Financial), Enterprise Products Partners LP (EPD, Financial), TRI Pointe Group Inc. (TPH, Financial), Morgan Stanley (MS, Financial), AllianceBernstein Holding LP (AB, Financial) and several others during the quarter.
The $276 million portfolio, which is composed of 37 holdings, is largely invested in the technology and health care sectors. According to GuruFocus, the fund underperformed the S&P 500 in 2017 with a return of 18.77%. The index posted a 21.71% return.
Disclosure: No positions.
