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Louis Moore Bacon's Firm Buys Fan-Favorite Names

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GuruFocus.com
·6 min read
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- By Margaret Moran

Louis Moore Bacon (Trades, Portfolio)'s Moore Capital Management recently disclosed its portfolio updates for the third quarter of 2020, which ended on Sept. 30.


New York-based Moore Capital Management was founded by Bacon in 1986. The firm uses a global, bold macro-based approach to investing. After 30 years of operation, the hedge fund closed itself to outside investors in late 2019 and consolidated its three flagship funds into one proprietary fund. Regarding the new arrangement, Bacon wrote, "Now I am once again concentrating on my personal investment account while overseeing a large multi-asset alternatives platform."

Based on its investing criteria, the firm's top new common stock buys during the quarter were The Walt Disney Co (NYSE:DIS), Annaly Capital Management Inc. (NYSE:NLY) and McDonald's Corp. (NYSE:MCD). It also established significant holdings in the BTC iShares MSCI Emerging Markets Exchange-Traded Fund (EEM) and the VanEck Vectors Semiconductor ETF (NASDAQ:SMH).

Walt Disney

The firm established a new holding of 555,531 shares in Walt Disney, impacting the equity portfolio by 1.32%. During the quarter, shares traded for an average price of $124.91.

Louis Moore Bacon's Firm Buys Fan-Favorite Names
Louis Moore Bacon's Firm Buys Fan-Favorite Names

The iconic mass media company is one of the largest producers of entertainment in the U.S. Based in Los Angeles, the multinational diversified media company produces movies and shows, owns and operates theme parks and provides streaming services such as ESPN+, Hulu and Disney+.

On Dec. 2, shares of Disney traded around $153.75 for a market cap of $278.27 billion. The GuruFocus Value chart rates the stock as significantly overvalued.

Louis Moore Bacon's Firm Buys Fan-Favorite Names
Louis Moore Bacon's Firm Buys Fan-Favorite Names

The company has a financial strength rating of 5 out of 10 and a profitability rating of 7 out of 10. The interest coverage ratio of 2.31 indicates the company has little room for error in meeting the interest payments on its debt, but the Altman Z-Score of 2.07 means it is not likely to face bankruptcy in the near future. Beginning mid-2019, the company's return on invested capital dipped below its weighted average cost of capital and has remained low since, indicating struggles with profitability.

Louis Moore Bacon's Firm Buys Fan-Favorite Names
Louis Moore Bacon's Firm Buys Fan-Favorite Names

Annaly Capital Management

The firm also took a new stake worth 5,843,228 shares in Annaly Capital Management, impacting the equity portfolio by 0.80%. Shares traded for an average price of $7.22 during the quarter.

Louis Moore Bacon's Firm Buys Fan-Favorite Names
Louis Moore Bacon's Firm Buys Fan-Favorite Names

Annaly is a large-scale New York-based mortgage real estate investment trust. It operates by borrowing money (primarily through short-term repurchase agreements) and investing the funds in asset-backed securities.

On Dec. 2, shares of Annaly traded around $8.11 for a market cap of $11.33 billion. According to the Peter Lynch chart, the stock is trading above its intrinsic value based on recent results.

Louis Moore Bacon's Firm Buys Fan-Favorite Names
Louis Moore Bacon's Firm Buys Fan-Favorite Names

The company has a financial strength rating of 5 out of 10 and a profitability rating of 3 out of 10. The cash-debt ratio of 0.17 is higher than the industry median of 0.08, while the Piotroski F-Score of 8 out of 9 suggests a healthy financial situation. The return on equity and return on assets have been in a downtrend over the past couple of decades to their current levels of -15.38% and -1.83%.

Louis Moore Bacon's Firm Buys Fan-Favorite Names
Louis Moore Bacon's Firm Buys Fan-Favorite Names

McDonald's

The firm invested in 149,271 shares of McDonald's, impacting the equity portfolio by 0.63%. During the quarter, shares traded for an average price of $205.07.

Louis Moore Bacon's Firm Buys Fan-Favorite Names
Louis Moore Bacon's Firm Buys Fan-Favorite Names

McDonald's is a foodservice retailer and the owner and franchiser of the iconic American fast-food chain of the same name. The company has more than 38,000 operated and franchised restaurants worldwide, 13,000 of which are in the U.S.

On Dec. 2, shares of McDonald's traded around $209.96 for a market cap of $156.31 billion. The GuruFocus Value chart rates the stock as modestly overvalued.

Louis Moore Bacon's Firm Buys Fan-Favorite Names
Louis Moore Bacon's Firm Buys Fan-Favorite Names

The company has a financial strength rating of 3 out of 10 and a profitability rating of 8 out of 10. The cash-debt ratio of 0.07 is lower than 86% of peers, though the Altman Z-Score of 3.99 suggests the company is not in danger of bankruptcy. The company has been steadily growing its operating margin and net margin over the years to their current levels of 42.16% and 28.59%.

Louis Moore Bacon's Firm Buys Fan-Favorite Names
Louis Moore Bacon's Firm Buys Fan-Favorite Names

BTC iShares MSCI Emerging Markets ETF

The firm bought 4,620,776 shares of the BTC iShares MSCI Emerging Markets ETF, impacting the equity portfolio by 3.91%. Shares traded for an average price of $43.87 during the quarter.

Louis Moore Bacon's Firm Buys Fan-Favorite Names
Louis Moore Bacon's Firm Buys Fan-Favorite Names

The BTC iShares MSCI Emerging Markets ETF is an ETF run by Blackrock Inc. (NYSE:BLK) that seeks to track an index of large- and mid-cap equities from emerging markets. As of Dec. 1, it had 1,220 holdings.

On Dec. 2, shares of the ETF traded around $49.83 for a market cap of $26.92 billion and a price-earnings ratio of 16.75. Over the past 12 months, shares of the ETF have gained approximately 20%.

Louis Moore Bacon's Firm Buys Fan-Favorite Names
Louis Moore Bacon's Firm Buys Fan-Favorite Names

VanEck Vectors Semiconductor ETF

The firm also invested in 285,000 shares of the VanEck Vectors Semiconductor ETF, impacting the equity portfolio by 0.95%. During the quarter, shares traded for an average price of $167.44.

Louis Moore Bacon's Firm Buys Fan-Favorite Names
Louis Moore Bacon's Firm Buys Fan-Favorite Names

The VanEck Vectors Semiconductor ETF, issued by VanEck, tracks an index of the 25 largest semiconductor companies listed in the U.S., weighted by market cap.

On Dec. 2, shares of the ETF traded around $213.54 for a market cap of $3.69 billion and a price-earnings ratio of 27.9. Over the past 12 months, shares of the ETF have gained approximately 62%.

Louis Moore Bacon's Firm Buys Fan-Favorite Names
Louis Moore Bacon's Firm Buys Fan-Favorite Names

Portfolio overview

As of the quarter's end, the firm's common stock equity portfolio consisted of 368 holdings valued at $5.22 billion. The top positions were Alibaba Group Holding Ltd. (BABA) with 6.46% of the equity portfolio, the BTC iShares MSCI Emerging Markets ETF with 3.91% and Amazon.com Inc. (AMZN) with 2.56%.

In terms of sector weighting, the firm was most invested in consumer cyclical, financial services and technology.

Louis Moore Bacon's Firm Buys Fan-Favorite Names
Louis Moore Bacon's Firm Buys Fan-Favorite Names

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:

  • The Biggest 3rd-Quarter Trades of the Oakmark International Small Cap Fund

  • Top 3rd-Quarter Trades of Tudor Investment Corp

  • Top 3rd-Quarter Buys of Steven Cohen's Firm



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This article first appeared on GuruFocus.