Howard Marks Buys 5.5% Stake in Cytec Industries

GuruFocus.com

Founder of Oaktree Capital Management Howard Marks (Trades, Portfolio) has purchased 802,772 shares of Cytec Industries Inc. (CYT), representing 5.5% of the company's shares outstanding, reports GuruFocus Real Time Picks.


Cytec Industries is a global specialty chemicals and materials company that, like many industrial companies, is engaged in lawsuits with thousands of claimants alleging injury from asbestos and lead pigment. More than 50 plaintiffs in the past 20 years have brought cases related to lead used in the company's architectural paint decades ago. The company is currently involved in eight lead ingestion cases. The total number of claimants suing Cytec for asbestos injuries as of March 31 totals in the 8,000s.

Cytec has reported continuing growth underlying an increasing stock price. Its net sales for 2013 jumped 13% from the previous year, primarily due to its acquisition of Umeco in July 2012, with 1% related to volume increases in existing businesses and 2% to higher pricing. Net earnings for the year increased to $171.7 million from $75.7 million the previous year.

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Cytec's gross margin has also been expanding annually for the past three years. It reached 33.69% in 2013, preceded by 30.83% in 2012.

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Over the past five years, Cytec's stock price has gained 353.7%. It trades around $101.76 per share on Monday, near a 10-year high price. Several of the company's valuation ratios have also reached 10-year peaks, with its P/B standing at 2.92 and P/S at 1.97. Its P/E ratio is 19.6.

Marks' stake in Cytec is the largest of investors followed by GuruFocus. Jim Simons (Trades, Portfolio) increased his position by 97% to 110,900 shares in the first quarter, and RS Investment Management (Trades, Portfolio) holds 709,028 shares after increasing the position by 19%. Other prominent managers sold out of their positions in the company in the first quarter, including Ray Dalio (Trades, Portfolio), David Tepper (Trades, Portfolio), Daniel Loeb (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio).

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This article first appeared on GuruFocus.
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