ValueAct Holdings, the activist investment firm founded by Jeff Ubben (Trades, Portfolio), disclosed this week its five new positions for the second quarter were The Stars Group Inc. (NASDAQ:TSG), Booking Holdings Inc. (NASDAQ:BKNG), Parsons Corp. (NYSE:PSN), XPO Logistics Inc. (NYSE:XPO) and Edison International (NYSE:EIX).
The San Francisco-based firm concentrates on acquiring significant ownership stakes in a limited number of companies it believes are fundamentally undervalued. The investment team seeks out-of-favor companies that are mispriced for a specific reason; ValueAct then works productively with management to maximize shareholder value.
As of quarter-end, ValueAct's $9.58 billion equity portfolio contained 23 stocks, of which five represent new positions. The financial services sector represents 57.83% of the equity portfolio; technology comes in second with 15.52% equity portfolio weight.
The Stars Group
ValueAct purchased 13.63 million shares of The Stars Group, giving the stake 2.43% equity portfolio weight. Shares averaged $17.78 during the quarter.
The Toronto-based gaming company operates online poker events through Amaya, which owns and operates platforms like PokerStars.net and Full Tilt. GuruFocus ranks The Stars Group's financial strength 3.5 out of 10 on several weak signs, which include interest coverage and debt ratios that underperform over 74.72% of global competitors.
ValueAct purchased 35,000 shares of Booking Holdings, giving the position 0.69% weight in the equity portfolio. Shares averaged $1,795.29 during the quarter.
The Norwalk, Connecticut-based company provides booking and reservation services through various online platforms, including Priceline.com, Open Table, Rentalcars.com and Kayak. GuruFocus ranks Booking's profitability 7 out of 10: Even though the company's three-year Ebitda growth rate of 15.80% outperforms just 54.83% of global competitors, its operating margin has increased approximately 0.40% per year on average over the past five years and is outperforming over 90% of global competitors. Additionally, Booking's business predictability ranks a solid 3.5 stars out of five.
Other gurus riding Booking's strong profitability include Diamond Hill Capital (Trades, Portfolio) and Spain-based Bestinfond (Trades, Portfolio).
ValueAct purchased 1.805 million shares of Parsons, giving the stake 0.69% equity portfolio space. Shares averaged $32.75 during the period between the company's May 6 initial public offering and June 30.
The Centreville, Virginia-based company provides for the future of global defense, intelligence and critical infrastructure across cybersecurity and missile defense. CEO Chuck Harrington said this week the company reported strong results in both its federal solutions and critical infrastructure markets, with revenues of $990 million up 10% from second-quarter 2018.
Third Point activist investor Daniel Loeb (Trades, Portfolio) also started a position in Parsons during the quarter.
ValueAct purchased 1 million shares of XPO Logistics, giving the holding 0.60% weight in the equity portfolio. Shares averaged $58.90 during the quarter.
The Greenwich, Connecticut-based company engages in various transportation operations, including asset-light truck brokerage, intermodal, last mile and global forwarding. GuruFocus ranks XPO Logistics' financial strength 4.1 out of 10 on several weak indicators, which include a debt-to-equity ratio that underperforms over 90% of global competitors. Despite this, XPO Logistics' Piotroski F-score ranks a solid 5 out of 9.
Baupost manager Seth Klarman (Trades, Portfolio) also established a holding in XPO Logistics during the quarter.
ValueAct purchased 700,000 shares of Edison International, giving the position 0.49% equity portfolio space. Shares averaged $62.08 during the quarter.
Edison International, a Rosemead, California-based electric company, is the parent company of Southern California Edison. The company owns interests in nonutility businesses that deal in energy-related products and services. According to GuruFocus, Edison International's debt ratios are underperforming over 72% of global competitors. The website warns the company's long-term debt has increased by $5.5 billion over the past three years.
Disclosure: No positions.
Read more here:
- Oaktree's Top 5 Buys of the 2nd Quarter
- Leon Cooperman's Top 5 Buys in the 2nd Quarter
- Philippe Laffont's Top 6 Buys in the 2nd Quarter
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 4 Warning Signs with TSG. Click here to check it out.
- TSG 15-Year Financial Data
- The intrinsic value of TSG
- Peter Lynch Chart of TSG