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David Carlson Buys 3, Sells 2 in 3rd Quarter

- By Sydnee Gatewood

David Carlson (Trades, Portfolio), manager of the Elfun Trusts, disclosed last week that the fund, which is now part of State Street Global Advisors, established three new positions and closed two others during the third quarter.


The guru, who picks stocks based on a company's potential to increase net income and dividends over time, opened positions in Corning Inc. (GLW), ServiceNow Inc. (NOW) and Booking Holdings Inc. (BKNG). He also divested his Comcast Corp. (CMCSA) and Starbucks Corp. (SBUX) positions.

Corning

Carlson invested in 750,000 shares of Corning, which had an average price of $32.49 per share during the quarter, allocating 0.94% of the equity portfolio to the holding.

The Corning, New York-based company, which produces glass and ceramic products, has a market cap of $26.34 billion; its shares were trading around $32.89 on Monday with a forward price-earnings ratio of 15.90, a price-book ratio of 2.23 and a price-sales ratio of 2.69.

The median price-sales chart shows the stock is trading near its historical value.

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GuruFocus rated Corning's financial strength 6 out of 10. Although the company has sufficient interest coverage, the Altman Z-Score of 2.9 indicates it is under some fiscal pressure. The company's profitability and growth scored an 8 out of 10 rating. While the operating margin is in decline, it still outperforms 84% of competitors. The company also has a moderate Piotroski F-Score of 4, suggesting conditions are stable, and a business predictability rating of three out of five stars. According to GuruFocus, companies with this rank typically see their stock prices gain an average of 8.2% per year. The rank is on watch, however, despite the company posting consistent revenue and earnings growth.

Of the gurus invested in Corning, Hotchkis & Wiley has the largest position with 2.21% of outstanding shares. Other top shareholders include PRIMECAP Management (Trades, Portfolio), Mairs and Power (Trades, Portfolio), Yacktman Asset Management (Trades, Portfolio), the Yacktman Fund (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), John Buckingham (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Robert Olstein (Trades, Portfolio), Dodge & Cox, Jeff Auxier (Trades, Portfolio) and John Hussman (Trades, Portfolio).

ServiceNow

The investor picked up 85,000 shares of ServiceNow, which traded at an average price of $189.12 per share during the quarter, dedicating 0.59% of the equity portfolio to the position.

The cloud computing company, which is headquartered in Santa Clara, California, has a $31.8 billion market cap; its shares were trading around $178.55 on Monday with a forward price-earnings ratio of 57.14, a price-book ratio of 31.16 and a price-sales ratio of 13.15.

According to the median price-sales chart, the stock is trading above its historical value.

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ServiceNow's financial strength and profitability and growth were both rated 6 out of 10 by GuruFocus. While the company has mediocre interest coverage, the Altman Z-Score of 7.78 indicates it is in good fiscal standing. Despite having an expanding operating margin, the company's margins and returns are negative and underperform a majority of industry peers. In addition, the Piotroski F-Score of 5 suggests conditions are stable.

With 3.99% of outstanding shares, Frank Sands (Trades, Portfolio) is the company's largest guru shareholder. Paul Tudor Jones (Trades, Portfolio), Caxton Associates (Trades, Portfolio), Pioneer, Gabelli, Jim Simons' (Trades, Portfolio) Renaissance Technologies, George Soros (Trades, Portfolio), Ron Baron (Trades, Portfolio), Steve Mandel (Trades, Portfolio), Chase Coleman (Trades, Portfolio) and Ken Fisher (Trades, Portfolio) also own the stock.

Booking Holdings

The guru purchased 3,000 shares of Booking Holdings, which traded at an average price of $1,969.55 per share during the quarter, giving it 0.21% space in the equity portfolio.

Based in Norwalk, Connecticut, the online travel agency has a $90.01 billion market cap; its shares were trading around $1,870 on Friday with a price-earnings ratio of 33.67, a price-book ratio of 8.55 and a price-sales ratio of 6.75.

The Peter Lynch shows the stock is trading above its fair value, suggesting it is overpriced.

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Booking Holdings' financial strength was rated 7 out of 10 by GuruFocus. While the company has issued approximately $2 billion in new long-term debt over the last three years, its Altman Z-Score of 5.98 indicates it is financially sound. In addition, the travel agency has good interest coverage. Its profitability and growth scored a 9 out of 10 rating based on an expanding operating margin, a high Piotroski F-Score of 7 and a 3.5-star business predictability rank. GuruFocus says companies with this rank not only have strong revenue and earnings growth, but see their stock prices gain an average of 9.3% per year.

Dodge & Cox is the company's largest guru shareholder with 1.45% of outstanding shares. Coleman, Mandel, Ruane Cunniff (Trades, Portfolio), Ron Baron (Trades, Portfolio), Greenblatt, Sands and many other gurus also have positions in the stock.

Comcast

Carlson shed his 1.6 million remaining shares of Comcast, which had an average price of $35.38 per share during the quarter. The trade had an impact of -1.97% on the portfolio. GuruFocus estimates he gained 7% on the investment since establishing it in the third quarter of 2015.

The Philadelphia-based media and telecom company has a $173.47 billion market cap; its shares were trading around $38.13 on Monday with a price-earnings ratio of 7.56, a price-book ratio of 2.43 and a price-sales ratio of 2.01.

According to the Peter Lynch chart, the stock is undervalued.

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GuruFocus rated Comcast's financial strength 5 out of 10. Although the company has issued roughly $21.3 billion in new long-term debt over the last several years, it is at a manageable level due to good interest coverage. The Altman Z-Score, however, suggests the company is under some financial stress. The company's profitability and growth scored an 8 out of 10 rating, boosted by an expanding operating margin, a moderate Piotroski F-Score of 6 and a 3.5-star business predictability rank due to consistent earnings and revenue growth.

With 2.9% of outstanding shares, Dodge & Cox is the company's largest guru shareholder. Greenblatt, Michael Price, Charles Brandes (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio) and many other gurus also have positions in the stock.

Starbucks

The investor sold his 200,000 remaining shares of Starbucks, which had an average price of $52.87 per share during the quarter, impacting the portfolio by -0.37%. According to GuruFocus, he lost an estimated 4% on the investment since establishing it in the first quarter of 2017.

The Seattle-based coffee chain has a market cap of $83.9 billion; its shares were trading around $64.09 on Monday with a price-earnings ratio of 20.09, a price-book ratio of 74.87 and a price-sales ratio of 3.63.

Based on the Peter Lynch chart, the stock appears to be overpriced.

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Starbucks' financial strength was rated 7 out of 10 by GuruFocus. Despite issuing $4.5 billion in new long-term debt over the last three years, the company has comfortable interest coverage to pay for it. The Altman Z-Score of 6.5 also indicates the company is financially healthy. The company's profitability and growth scored an 8 out of 10 rating based on an expanding operating margin, a moderate Piotroski F-Score of 5 and a three-star business predictability rank. It also has good earnings and revenue growth.

Of the gurus invested in Starbucks, Pioneer has the largest stake with 0.23% of outstanding shares. Mairs and Power (Trades, Portfolio), Caxton, Diamond Hill Capital (Trades, Portfolio), Robertson, Gabelli, Dalio, Sands, Stahl, Tom Gayner (Trades, Portfolio), Lee Ainslie (Trades, Portfolio), Auxier, Jerome Dodson (Trades, Portfolio), Smead Capital Management and Fisher are also shareholders.

Other trades

During the quarter, Carlson added to positions such as Walt Disney Co. (DIS), Microsoft Corp. (MSFT), Applied Materials Inc. (AMAT) and several others. He also trimmed holdings, including Intuit Inc. (INTU) and Salesforce.com Inc. (CRM).

The guru's $2.82 billion portfolio, which is composed of 45 stocks, is largely invested in the technology, financial services and health care sectors. According to GuruFocus data, the fund outperformed the S&P 500 index in 2017 with a return of 25.61%. The index posted a 21.71% return.

Disclosure: No positions.

Read more here:

  • Starbucks Tops Expectations in 4th Quarter
  • Microsoft Continues Reaching for the Cloud
  • Risk-Reward With Comcast


This article first appeared on GuruFocus.