- By Margaret Moran
Greenberg and John Shapiro founded Chieftain Capital Management in 1984, and when the partners split the firm up into two separate companies in 2010, Greenberg's firm was renamed Brave Warrior Investors. Greenberg runs a highly concentrated portfolio, which he holds is a "defense against ignorance," as the more companies you own, the less you know about each. He prefers to invest in companies with little competition, high return on invested capital and good balance sheet strength that are trading at attractive valuations.
Based on these investing criteria, the firm established one new position in Ryanair Holdings PLC (NASDAQ:RYAAY) during the quarter. Top additions to existing positions included Berkshire Hathaway Inc. Class B shares (NYSE:BRK.B) and HCA Healthcare Inc. (NYSE:HCA), while top sells included UnitedHealth Group Inc. (NYSE:UNH) and Anthem Inc. (NYSE:ANTM).
The firm established a new position of 248,506 shares in Ryanair Holdings after selling out of its previous holding in the company in the third quarter of 2011. The trade had a 0.82% impact on the equity portfolio. During the quarter, shares traded for an average price of $63.07.
Ryanair Holdings is a holding company for a family of airlines and adjacent companies, including Ryanair DAC, Ryanair UK, Buzz, Malta Air and Lauda. It also provides travel insurance and accommodation services.
On Aug. 21, shares of Ryanair Holdings traded around $79.28 for a market cap of $17.28 billion. According to the Peter Lynch chart, the stock is trading above the value of its recent earnings but near the value of its earnings from 2018-19.
GuruFocus gives the company a financial strength rating of 5 out of 10 and a profitability rating of 9 out of 10. The cash-debt ratio of 0.81 is higher than 74.04% of competitors, though the Altman Z-Score of 1.44 suggests the company may face liquidity issues. The operating margin of 10.53% nearly doubles the industry median of 5.36%, though the net margin of 3.51% is closer to the industry median of 2.48%.
The firm increased its investment in its largest holding, Berkshire Hathaway, by 319,463 shares, or 18.31%, for a total holding of 2,064,178 shares. The trade impacted the equity portfolio by 2.84%. Shares traded for an average price of $182.68 during the quarter.
Berkshire Hathaway is the conglomerate headed by famous value investor Warren Buffett (Trades, Portfolio) and his partner Charlie Munger (Trades, Portfolio). The group owns a wide variety of businesses, including Geico and other insurance companies, Berkshire Hathaway Energy, BNSF and a sizable investment portfolio.
On Aug. 21, Berkshire's B shares traded around $207.90 for a market cap of $496.59 billion. The price-earnings ratio of 22.79 is unreliable due to Berkshire's large stock portfolio, which is required to report the changes in the valuations of its holdings as part of the earnings. The price-to-operating-earnings ratio of 12.84 is thus necessary to consider.
GuruFocus gives the company a financial strength rating of 5 out of 10 and a profitability rating of 6 out of 10. The company has approximately $127 billion in cash compared to $103 billion in debt. It has a return on equity of 5.64% and a return on assets of 2.84%, with an equity-to-asset ratio of 0.5.
HCA Healthcare Inc.
The firm also added 282,852, or 20.47%, to its investment in HCA Healthcare for a total of 1,664,795 shares, impacting the equity portfolio by 1.36%. During the quarter, shares traded for an average price of $103.85.
Based in Nashville, Tennessee, HCA Healthcare is a for-profit owner of health care facilities primarily in the U.S. The company owns more than 180 hospitals and 2,000 various sites of care in 21 U.S. states and the United Kingdom.
On Aug. 21, shares of HCA traded around $132.40 for a market cap of $44.76 billion. According to the Peter Lynch chart, the stock is trading near its intrinsic value.
GuruFocus gives the company a financial strength rating of 4 out of 10 and a profitability rating of 8 out of 10. The cash-debt ratio of 0.14 is below 75.49% of competitors, but the Altman Z-Score of 2.02 suggests the company is not likely to face bankruptcy issues. The operating margin of 14.26% is higher than 81.73% of competitors, while the net margin of 6.67% is higher than 73.85% of competitors.
The firm cut its stake in UnitedHealth Group Inc. by 97,609 shares, reducing the position by 37.1% for a remaining holding of 165,491 shares. The trade had a -1.40% impact on the equity portfolio. Shares traded for an average price of $285.69 during the quarter.
UnitedHealth is a managed care company based in Minnetonka, Minnesota. The largest company of its kind by revenue, UnitedHealth offers a variety of health care products and insurance services through its many subsidiaries.
On Aug. 21, UnitedHealth shares traded around $313.96 for a market cap of $298.34 billion. According to the Peter Lynch chart, the stock is trading slightly above its intrinsic value.
GuruFocus gives the company a financial strength rating of 6 out of 10 and a profitability rating of 9 out of 10. The Altman Z-Score of 3.54 and interest coverage ratio of 12.97 indicate the company can comfortably make the payments on its debt. The operating margin of 9.24% and net margin of 6.94% are outperforming 60% of competitors.
The firm also reduced its Anthem position by 103,999, or 11.88%, for a remaining holding of 771,468 shares, though it remains the third-largest position in the equity portfolio. The trade impacted the equity portfolio by -1.36%. During the quarter, shares traded for an average price of $265.97.
Anthem is a health insurance provider based in Indianapolis. It is the largest for-profit managed care company in the Blue Cross Blue Shield Association with more than 40 million members.
On Aug. 21, shares of Anthem traded around $284.63 for a market cap of $71.59 billion. According to the Peter Lynch chart, the stock is trading below its intrinsic value.
GuruFocus gives the company a financial strength rating of 5 out of 10 and a profitability rating of 7 out of 10. The cash-debt ratio of 0.28 is lower than 68.42% of competitors, but the interest coverage ratio of 11.16 shows the company can make the interest payments on its debt. The company has a three-year revenue growth rate of 8.1% and a three-year Ebitda growth rate of 9.4%.
As of the quarter's end, the firm held 21 common stock positions valued at $2.01 billion. The top holdings were Berkshire Hathaway B shares with 18.32% of the equity portfolio, Alphabet Inc. (GOOGL) with 11.62% and Anthem with 10.09%.
In terms of sector weighting, the firm was most invested in financial services, followed by health care and communication services.
Disclosure: Author owns no shares in any of the stocks mentioned. The mention of stocks in this article does not at any point constitute an investment recommendation. Portfolio updates reflect only common stock positions as per the regulatory filings for the quarter in question and may not include changes made after the quarter ended.
Read more here:
Top 2nd-Quarter Buys of John Rogers' Ariel Investments
Howard Marks' Oaktree Buys PG&E, Sells Oil Stocks
The Most Popular Guru Buys of the 2nd Quarter
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
This article first appeared on GuruFocus.