With a long-term horizon, the guru's firm seeks to invest in durable, well managed companies that can be purchased at value prices, preferably when they are out of favor.
Based on these criteria, Davis established holdings in Humana Inc. (NYSE:HUM), China Index Holdings Ltd. (NASDAQ:CIH) and Welltower Inc. (NYSE:WELL) during the quarter.
The guru invested in 133,960 shares of Humana, allocating 0.18% of the equity portfolio to the holding. The stock traded for an average price of $253.55 per share during the quarter.
The Louisville, Kentucky-based managed care company has a $41 billion market cap; its shares were trading around $304.63 on Tuesday with a price-earnings ratio of 16.59, a price-book ratio of 3.47 and a price-sales ratio of 0.70.
The Peter Lynch chart shows the stock is trading above its fair value, suggesting it is overpriced.
Humana's financial strength and profitability and growth were both rated 5 out of 10 by GuruFocus. Despite issuing approximately $1.6 billion in new long-term debt over the past three years, the cash-debt ratio of 0.81 outperforms nearly 60% of competitors.
The company is also supported by strong returns, consistent earnings and revenue growth and a business predictability rank of 4.5 out of five stars. According to GuruFocus, companies with this rank typically see their stocks gain an average of 10.6% per annum over a 10-year period.
Of the gurus invested in Humana, Jim Simons (Trades, Portfolio)' Renaissance Technologies has the largest stake with 2.18% of outstanding shares. Diamond Hill Capital (Trades, Portfolio) also established a position during the quarter. Larry Robbins (Trades, Portfolio), the Vanguard Health Care Fund (Trades, Portfolio), Lee Ainslie (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Caxton Associates (Trades, Portfolio) and Ron Baron (Trades, Portfolio) are also shareholders.
China Index Holdings
Davis picked up 3.59 million shares of China Index Holdings, dedicating 0.06% of the equity portfolio to the stake. During the quarter, the stock traded for an average per-share price of $3.38.
The Chinese real estate information and analytics service, which was spun off of Fang Holdings Ltd. (NYSE:SFUN) in June, has a market cap of $204.72 million; its shares were trading around $2.11 on Tuesday.
According to GuruFocus, the stock has tumbled approximately 36% since its market debut on June 12.
GuruFocus rated China Index Holdings' financial strength 3.4 out of 10 and its profitability and growth 1 out of 10.
Davis holds 3.74% of the company's outstanding shares.
After exiting a position in Welltower in the fourth quarter of 2018, the investor entered a new 150,120-share holding. The trade had an impact of 0.06% on the equity portfolio. Shares traded for an average price of $78.57 during the quarter.
The real estate investment trust, which is headquartered in Toledo, Ohio, has a $35.37 billion market cap; its shares were trading around $87.66 on Tuesday with a price-earnings ratio of 58.89, a price-book ratio of 2.24 and a price-sales ratio of 6.82.
Based on the Peter Lynch chart, the stock appears to be overvalued.
Welltower's financial strength was rated 3.8 out of 10 by GuruFocus. As a result of issuing approximately $1.9 billion in new long-term debt over the past three years, the company has poor interest coverage. In addition, the Altman Z-Score of 1.32 warns it could be in danger of going bankrupt.
The company's profitability and growth fared a bit better, scoring a 5 out of 10 rating on the back of a moderate Piotroski F-Score of 5, which suggests operations are stable, and a one-star business predictability rank. GuruFocus says companies with this rank typically see their stocks gain an average of 1.1% per year.
With 0.39% of outstanding shares, Pioneer has the largest position in Welltower. Other top guru shareholders are Simons' firm, Greenblatt, Steven Cohen (Trades, Portfolio) and Baron.
During the quarter, Davis also added to a number of holdings, including Intel Corp. (NASDAQ:INTC), New Oriental Education & Technology Group Inc. (NYSE:EDU), Encana Corp. (NYSE:ECA), Quest Diagnostics Inc. (NYSE:DGX) and UnitedHealth Group Inc. (NYSE:UNH), among others.
The guru's $20.22 billion equity portfolio, which is composed of 132 stocks, is heavily invested in the financial services sector.
Disclosure: No positions.
Read more here:
- The Top 5 Buys of Chuck Royce's Firm
- The Top 5 Buys of Ken Heebner's CGM
- AzValor Iberia Takes Positions in Pulp Mill Operator, Business Services Company
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
This article first appeared on GuruFocus.
- Warning! GuruFocus has detected 1 Warning Sign with HUM. Click here to check it out.
- HUM 15-Year Financial Data
- The intrinsic value of HUM
- Peter Lynch Chart of HUM