U.S. markets close in 2 hours 27 minutes

Frank Sands Adds 5 Stocks to Portfolio

Guru Frank Sands (Trades, Portfolio), CEO and chief investment officer of Sands Capital Management, released his first-quarter portfolio earlier this month, listing five new holdings.


The Arlington, Virginia-based value investment firm, which was founded by Sands' father in 1992, approaches stock picking with the belief that, over time, stock prices reflect the underlying company's earnings growth. Using a fundamental, business-focused process, the investment team looks for a concentrated number of high-quality, wealth-creating growth opportunities to hold for the long term.

Keeping these criteria in mind, Sands established positions in Uber Technologies Inc. (NYSE:UBER), Square Inc. (NYSE:SQ), Zillow Group Inc. (NASDAQ:Z), DexCom Inc. (NASDAQ:DXCM) and Globant SA (NYSE:GLOB) during the quarter.

Uber

In his largest transaction of the quarter, Sands invested in 20.94 million shares of Uber, allocating 1.95% of the equity portfolio to the stake. The stock traded for an average price of $33 per share during the quarter.

The San Francisco-based ridesharing company, which also offers food delivery services and rents out electric scooters, has a $62.02 billion market cap; its shares were trading around $35.16 on Tuesday with a price-book ratio of 5.32 and a price-sales ratio of 3.68.

The chart shows the stock is trading above both its median price-sales ratio and its median book value.

a92e73196db93c061fe7c596eeddb82f.png

GuruFocus rated Uber's financial strength 4 out of 10 on the back of a cash debt ratio of 1.06, which is underperforming on a historical basis as well as compared to its peers, and a low Altman Z-Score of 0.66. The score warns the company could be in danger of going bankrupt.

The company's profitability fared even worse, scoring a 1 out of 10 rating on the back of negative margins and returns that underperform a majority of competitors.

Of the gurus invested in Uber, Andreas Halvorsen (Trades, Portfolio) has the largest stake with 1.51% of outstanding shares. Other top guru shareholders include Chase Coleman (Trades, Portfolio), Spiros Segalas (Trades, Portfolio), Pioneer Investments (Trades, Portfolio) and Philippe Laffont (Trades, Portfolio).

Square

The guru picked up 5.69 million shares of Square, dedicating 1% of the equity portfolio to the position. During the quarter, shares traded for an average price of $68.53 each.

Headquartered in San Francisco, the financial services company, which facilitates merchant services and mobile payments, has a market cap of $35.91 billion; its shares were trading around $81.82 on Tuesday with a price-earnings ratio of 129.75, a price-book ratio of 19.66 and a price-sales ratio of 7.52.

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

d91b3998547829b5772985b4532454e9.png

Supported by adequate interest coverage and a robust Altman Z-Score of 6.49, Square's financial strength was rated 6 out of 10 by GuruFocus. Since the weighted average cost of capital surpasses the return on invested capital, however, the company may struggle with profitability. Similarly, the company's assets are building up at a faster rate than revenue is growing, suggesting it may be becoming less efficient.

The company's profitability scored a 3 out of 10 rating. While the operating margin is underperforming versus its industry peers, Square has strong returns and a moderate Piotroski F-Score of 5, which implies business conditions are stable.

With a 1.52% stake, Steve Mandel (Trades, Portfolio) is Square's largest guru shareholder. Laffont, Segalas and Ken Fisher (Trades, Portfolio) also have large positions in the stock.

Zillow Group

The investor entered a 3.96 million-share stake in Zillow Group, giving it 0.48% space in the equity portfolio. The stock traded for an average per-share price of $46.30 during the quarter.

The Seattle-based company, which operates an online real estate database, has a $13 billion market cap; its shares were trading around $59.92 on Tuesday with a price-book ratio of 3.6 and a price-sales ratio of 3.57.

Based on the price chart, the stock appears to be trading above both its median price-book ratio and its median sales value.

0c912f101332c293832941857f308011.png

GuruFocus rated Zillow's financial strength 6 out of 10 on the back of a high Altman Z-Score of 3.73, which indicates it is in good standing even though its assets are building up at a faster rate than revenue is growing.

Weighed down by negative margins and returns that underperform a majority of competitors, the company's profitability scored a 3 out of 10 rating. Zillow also has a low Piotroski F-Score of 3, which suggests operations are in poor condition. It also has a business predictability rank of one out of five stars. According to GuruFocus, companies with this rank typically return an average of 1.1% per annum over a 10-year period.

With his purchase of 1.86% of Zillow's outstanding shares, Sands is now the largest guru shareholder. Ron Baron (Trades, Portfolio), First Eagle Investment (Trades, Portfolio), Pioneer Investments (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio) also own the stock.

DexCom

Sands purchased 497,670 shares of DexCom, expanding the equity portfolio by 0.45%. During the quarter, the stock traded for an average price of $248.70.

Headquartered in San Diego, the company, which manufactures continuous glucose monitoring systems for managing diabetes, has a market cap of $36.51 billion; its shares were trading around $384.75 on Tuesday with a price-earnings ratio of 243.47, a price-book ratio of 38.98 and a price-sales ratio of 22.4.

The Peter Lynch chart suggests the stock is overvalued.

56a9b15672689ad5c2a5255478c087dd.png

DexCom's financial strength was rated 6 out of 10 by GuruFocus. Although the company has weak interest coverage, the robust Altman Z-Score of 16.52 indicates it is in good standing despite the fact its assets are building up at a faster rate than revenue is growing. Its Sloan ratio also implies it has poor earnings quality. The ROIC, however, surpasses the WACC by a wide margin, indicating good profitability.

The company's profitability scored a 3 out of 10 rating despite having strong margins and returns that outperform a majority of industry peers. DexCom also has a moderate Piotroski F-Score of 6 and a one-star business predictability rank.

Of the gurus invested in DexCom, Segalas has the largest stake with 1.1% of outstanding shares. Other gurus who have an interest in the company are Jim Simons (Trades, Portfolio)' Renaissance Technologies, Baron, Pioneer, Joel Greenblatt (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Jones and Caxton Associates (Trades, Portfolio).

Globant

The guru bought 694,796 shares of Globant. The trade had an impact of 0.2% on the equity portfolio. Shares traded for an average price of $111.94 each during the quarter.

The Argentine software development company has a $5.31 billion market cap; its shares were trading around $142.99 on Tuesday with a price-earnings ratio of 97.89, a price-book ratio of 11.99 and a price-sales ratio of 7.68.

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

cf7be0ce4b0372bd4bc00c2658bfd061.png

Globant's financial strength and profitability were both rated 7 out of 10 by GuruFocus. The company not only has a comfortable level of interest coverage, but a high Altman Z-Score of 11.63 as well. The ROIC is also higher than the WACC, suggesting it is profitable even though assets are building up at a faster rate than revenue is growing.

In addition to an expanding operating margin, the company has strong returns that outperform over 70% of its competitors. It has a low Piotroski F-Score of 2, however, which indicates business conditions are in poor shape.

Sands is now the company's largest guru shareholder with a 1.87% stake. Fisher, Baron, Pioneer, Greenblatt, Caxton and Jones also own the stock.

Additional trades and portfolio performance

During the quarter, Sands also significantly boosted his stakes in Netflix Inc. (NASDAQ:NFLX) and Sea Ltd. (NYSE:SE) as well as curbed his holdings of Alibaba Group Holding Ltd. (NYSE:BABA), Texas Instruments Inc. (NASDAQ:TXN), Salesforce.com Inc. (NYSE:CRM) and Edwards Lifesciences Corp. (NYSE:EW). He also added to or reduced a slew of other positions.

Around half of the guru's $29.9 billion equity portfolio, which is composed of 76 stocks, is invested in the technology and communication services sectors, followed by smaller representations of the consumer cyclical and health care spaces.

2f9858b7aaf2c3bed9f2755d8ab735d7.png

GuruFocus data shows the firm's Select Growth Fund returned 33.3% in 2019, slightly outperforming the S&P 500's 31.48% return.

Disclosure: No positions.

Read more here:

  • David Abrams Sells O'Reilly Automotive, Buys TransDigm and Energy Transfer
  • Jeff Auxier Buys Ingersoll Rand, Sells Smucker
  • Bill Ackman Adds 2 Stocks to Portfolio, Expands Agilent and Howard Hughes Stakes



Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.

This article first appeared on GuruFocus.