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John Hussman's Top 3 New Holdings

- By Sydnee Gatewood

John Hussman (Trades, Portfolio), founder, chairman and president of Hussman Strategic Advisors Inc., added 59 new holdings to his portfolio in the final quarter of 2016. His top three new holdings are Dick's Sporting Goods Inc. (DKS), Orbotech Ltd. (ORBK) and Donaldson Co. Inc. (DCI).


Hussman founded his firm in 1988. The Maryland-based firm seeks long-term capital appreciation through investing in companies with favorable valuations and favorable market action. The firm defines favorable valuation as "security prices appear reasonable in view of the stream of cash flows expected in the future." The firm defines favorable market action as "trends are advancing across a wide range of market internals."

After selling out of Dick's Sporting Goods in the first quarter of 2016, the guru established a new stake of 127,000 shares for an average price of $57.37 per share. The transaction had an impact of 1.34% on the portfolio.

The company is the largest retailer of sporting goods in the U.S. The Pennsylvania-based company has a market cap of $5.7 billion and an enterprise value of $5.9 billion. Its shares were trading around $50.77 on Thursday with a price-earnings (P/E) ratio of 17.6, a forward P/E ratio of 13.6, a price-book (P/B) ratio of 3.04 and a price-sales (P/S) ratio of 0.75.

The Peter Lynch chart below shows the stock is trading above its fair value.

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GuruFocus ranked the company's financial strength 7 of 10. The Piotroski F-Score of 5 and Altman Z-Score of 4.4 suggest the company is in stable business and financial condition. The return on invested capital (ROIC) is outperforming the weighted average cost of capital (WACC) so the company is creating value as it grows. The cash-debt ratio of 0.3 indicates the company is not able to cover outstanding debt with cash on hand.

Dick's profitability and growth was ranked 8 of 10 by GuruFocus. It has an operating margin of 6.7% and a net margin of 4.3%. The return on equity (ROE) and return on assets (ROA) outperform 81% and 79% of other companies in the global specialty retail industry. Similarly, the return on capital (ROC) outperforms 68% of competitors.

Ron Baron (Trades, Portfolio) is the company's largest shareholder among the gurus with 2.34% of its outstanding shares, which represents 0.8% of his total assets managed. In total, 12 gurus hold positions in Dick's Sporting Goods.

Hussman purchased 200,000 shares of Orbotech for an average price of $30.57 per share. The trade expanded the portfolio by 1.33%.

Orbotech is a consumer electronics company headquartered in Israel. It has a market cap of $1.6 billion and an enterprise value of $1.5 billion. Its shares were trading around $34.72 on Thursday with a P/E ratio of 22.5, a forward P/E ratio of 10.9, a P/B ratio of 2.3 and a P/S ratio of 2.03.

The Peter Lynch chart below shows the stock is trading above its fair value.

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GuruFocus ranked Orbotech's financial strength 8 of 10. The high Piotroski F-Score of 7 and Altman Z-Score of 5.1 indicate the company is in healthy business and financial condition. The company is creating value as it grows because the ROIC is outperforming the WACC. The cash-debt ratio of 1.8 suggests the company is able to pay its debt with cash on hand.

The company's profitability and growth was ranked 7 of 10 by GuruFocus. It has an operating margin of 13.4% and a net margin of 8.9%. The ROE and ROA outperform 72% and 75% of other companies in the global scientific and technical instruments industry. The ROA also outperforms 80% of competitors.

Jim Simons (Trades, Portfolio) holds the largest position in Orbotech among the gurus. He holds 4.5% of its outstanding shares, which is 0.11% of his total assets managed. Chuck Royce (Trades, Portfolio) and Richard Snow (Trades, Portfolio) also hold positions.

Hussman bought 150,000 shares of Donaldson for an average price of $39.67 per share. The trade had an impact of 1.3% on the portfolio.

Donaldson manufactures filtration systems and replacement parts for a vast number of industries, ranging from aerospace, automotive and agriculture to medical and packaging. The Minneapolis-based company has a market cap of $5.5 billion and an enterprise value of $5.8 billion. Its shares were trading around $42.01 on Thursday with a P/E ratio of 26.7, a forward P/E ratio of 26.7, a P/B ratio of 7.1 and a P/S ratio of 2.5.

The Peter Lynch chart below shows the stock is trading above its fair value.

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GuruFocus ranked the company's financial strength 7 of 10. The Piotroski F-Score of 9 and Altman Z-Score of 6.2 indicate the company is in extremely healthy business and financial condition. The company is creating value as it grows since the ROIC outperforms the WACC. The cash-debt ratio of 0.5 implies the company is not able to cover debt with cash on hand.

Donaldson's profitability and growth was ranked 8 of 10 by GuruFocus. It has an operating margin of 13.2% and a net margin of 9.4%. The ROE and ROA outperform 93% and 90% of other companies in the global diversified industrials industry. The ROC outperforms 82% of competitors.

Mairs and Power (Trades, Portfolio) is the company's largest shareholder among the gurus with 4.24% of Donaldson's outstanding shares. This represents 2.7% of its total assets managed. Mario Gabelli (Trades, Portfolio), Royce, Simons and Joel Greenblatt (Trades, Portfolio) also hold positions.

Other holdings Hussman established during the quarter were Intuitive Surgical Inc. (ISRG), Kohl's Corp. (KSS) and VMWare Inc. (VMW). Visit Hussman's portfolio to see all of his current holdings and new buys.

Disclosure: I do not own any stocks mentioned in the article.

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This article first appeared on GuruFocus.