U.S. Markets close in 4 hrs 33 mins

John Rogers Makes Several Changes to Portfolio in February

- By Sydnee Gatewood

Ariel Investments leader John Rogers (Trades, Portfolio) disclosed on Feb. 28 that he boosted his position in Perceptron Inc. (PRCP) by 12.46%, curbed his stake in Bristow Group Inc. (BRS) by 30.17% and divested of SeaChange International Inc. (SEAC).


The guru's Chicago-based firm invests in undervalued small and mid-cap companies that have sustainable competitive advantages, high barriers to entry and predictable fundamentals that allow for double-digit earnings growth. Rogers emphasizes that patience, independent thinking and a long-term outlook are necessary for generating good returns.

Perceptron

According to GuruFocus Real-Time Picks, a Premium feature, Rogers invested in 117,680 shares of Perceptron for an average price of $7.40 per share. He now holds 1.06 million shares, which represent 0.11% of the equity portfolio.

GuruFocus estimates he has lost 9.05% on the investment since the second quarter of 2009.

02bc79e0-4407-11e9-b47c-75f6c43b1f12.png

The Plymouth, Michigan-based producer of 3-D automated industrial metrology solutions and coordinate measuring machines has a $74.29 million market cap; its shares were trading around $7.72 on Monday with a price-earnings ratio of 17.55, a price-book ratio of 1.49 and a price-sales ratio of 0.85.

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

134981437.png

On Feb. 11, Perceptron reported second-quarter 2019 financial results. The company posted earnings of 16 cents per share on $21.6 million in revenue, which grew 5.9% from the prior-year quarter.

Boosted by good interest coverage and a high cash-debt ratio of 116.38, GuruFocus rated Perceptron's financial strength 8 out of 10. In addition, the Altman Z-Score of 3.83 indicates the company is in good fiscal health.

The company's profitability and growth scored a 6 out of 10 rating. Although the gross margin is in decline, the operating margin outperforms 58% of competitors. Perceptron is also supported by strong returns that outperform industry peers, a moderate Piotroski F-Score of 6, which indicates operating conditions are stable, and a business predictability rank of one out of five stars. According to GuruFocus, companies with this rank typically see their stocks gain an average of 1.1% per year.

With approximately 10% of outstanding shares, Rogers is Perceptron's largest guru shareholder. Chuck Royce (Trades, Portfolio) and Jim Simons' (Trades, Portfolio) Renaissance Technologies also have positions in the stock.

Bristow Group

The investor axed 2.26 million shares of Bristow Group for an average price of $1.18 per share. He now holds 5.2 million shares, which represent 0.09% of the equity portfolio.

According to GuruFocus, he has lost an estimated 85.8% on the investment since the fourth quarter of 2012.

8fb31a00-440a-11e9-9775-fbc59094d896.png

Headquartered in Houston, the helicopter operator, which serves the offshore oil and gas industry, has a market cap of $40.09 million; its shares were trading around $1.12 on Monday with a price-book ratio of 0.04 and a price-sales ratio of 0.03, which GuruFocus noted were near 10-year lows.

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

1609421823.png

In his fourth-quarter letter to shareholders, Rogers said Bristow underperformed as it "battled the perfect storm of falling oil prices and uncertainty surrounding oil field services spending."

Bristow's financial strength and profitability and growth were both rated 4 out of 10 by GuruFocus. As a result of issuing $447.45 million in new long-term debt and recording a loss in operating income over the last three years, the Altman Z-Score of 0.69 warns the company is in danger of going bankrupt.

The company also has negative margins and returns that underperform competitors, though the Piotroski F-Score of 4 suggests operations are stable. Bristow also has a one-star business predictability rank, which is on watch as a result of declining revenue per share over the last five years.

With approximately 20% of outstanding shares, Rogers is the company's largest guru shareholder. Simons' firm also owns the stock.

SeaChange International

Rogers sold his remaining 2.4 million shares of SeaChange for an average price of $1.45 per share, impacting the equity portfolio by -0.04%.

GuruFocus estimates he lost 60% on the investment since establishing it in the first quarter of 2015.

99c386c0-4416-11e9-a163-9773c33daff0.png

The telecommunications company, which is based in Acton, Massachusetts, has a $52.62 million market cap; its shares were trading around $1.45 on Monday with a price-earnings ratio of 24.17, a price-book ratio of 0.70 and a price-sales ratio of 0.76.

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

48066717.png

In December, the company recorded a third-quarter 2019 loss of 7 cents per share on $18.6 million in revenue, which declined from the year-ago quarter.

Driven by no long-term debt and comfortable interest coverage, GuruFocus rated SeaChange's financial strength 8 out of 10. The Altman Z-Score of -0.18, however, warns the company is at risk of bankruptcy.

The company's profitability and growth did not fare as well, scoring a 3 out of 10 rating as a result of margins and returns that underperform industry peers. It also has a moderate Piotroski F-Score of 5 and a one-star business predictability rank, which is on watch since SeaChange's revenue per share has been in decline for the last five years.

Simons' firm now has the largest holding of SeaChange with 4.36% of outstanding shares. Royce is also a shareholder.

Portfolio and performance

Rogers' $7.18 billion equity portfolio is composed of 157 stocks. The four largest sectors represented are financial services, technology, consumer cyclical and industrials.

As of the end of the fourth quarter, his five largest holdings were Microsoft Corp. (MSFT), Baidu Inc. (BIDU), Philip Morris International Inc. (PM), First American Financial Corp. (FAF) and Kennametal Inc. (KMT).

According to GuruFocus, the Ariel Fund returned -13.67% in 2018, underperforming the S&P 500 Index's -5.97% return.

Disclosure: No positions.

Read more here:

  • Costco Shares Gain on Strong Quarterly Earnings
  • 4 European Consumer Defensive Stocks to Consider as ECB Slashes Growth Forecast
  • John Paulson Expands Position in BrightSphere Investment Group


This article first appeared on GuruFocus.