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Muhlenkamp & Co.'s Top 4 Trades of the 3rd Quarter

GuruFocus.com
·3 min read

- By James Li

Muhlenkamp & Co., the firm founded by Ronald Muhlenkamp (Trades, Portfolio), disclosed this week that its top four trades in the third quarter featured reductions in its holdings in Microsoft Corp. (NASDAQ:MSFT) and Apple Inc. (NASDAQ:AAPL), a position boost in MasTec Inc. (NYSE:MTZ) and a new buy in Kirby Corp. (NYSE:KEX).


The Wexford, Pennsylvania-based firm seeks long-term capital appreciation on the belief that stock prices will eventually reflect the values of the underlying businesses. Muhlenkamp looks for companies with strong balance sheets and high returns on equity.

Muhlenkamp & Co.'s Top 4 Trades of the 3rd Quarter
Muhlenkamp & Co.'s Top 4 Trades of the 3rd Quarter

As of quarter-end, the firm's $193 million equity portfolio contains 33 stocks, with two new holdings and a turnover of 4%. The top three sectors in terms of weight are health care, technology and consumer cyclical, with representations of 25.03%, 19.53% and 17.87%.

Muhlenkamp & Co.'s Top 4 Trades of the 3rd Quarter
Muhlenkamp & Co.'s Top 4 Trades of the 3rd Quarter

Microsoft

Muhlenkamp sold 38,052 shares of Microsoft, reducing the position 46.13% and the equity portfolio 4.14%. Shares averaged $210.04 during the second quarter.

Muhlenkamp & Co.'s Top 4 Trades of the 3rd Quarter
Muhlenkamp & Co.'s Top 4 Trades of the 3rd Quarter

GuruFocus ranks the Redmond, Washington-based software giant's profitability 9 out of 10 on several positive investing signs, which include a high Piotroski F-score of 8 and an operating margin that has increased approximately 4.3% per year on average over the past five years and is outperforming over 96% of global competitors.

Muhlenkamp & Co.'s Top 4 Trades of the 3rd Quarter
Muhlenkamp & Co.'s Top 4 Trades of the 3rd Quarter

Despite high profitability, Microsoft is significantly overvalued with a price-to-GF Value ratio of 1.37.

Muhlenkamp & Co.'s Top 4 Trades of the 3rd Quarter
Muhlenkamp & Co.'s Top 4 Trades of the 3rd Quarter

Gurus with large holdings in Microsoft include Ken Fisher (Trades, Portfolio) and PRIMECAP Management (Trades, Portfolio).

Muhlenkamp & Co.'s Top 4 Trades of the 3rd Quarter
Muhlenkamp & Co.'s Top 4 Trades of the 3rd Quarter

Apple

The firm sold 77,361 shares of Apple, trimming the position 49.46% and the equity portfolio 3.77%. Shares averaged $109.02 during the third quarter on a split-adjusted basis.

Muhlenkamp & Co.'s Top 4 Trades of the 3rd Quarter
Muhlenkamp & Co.'s Top 4 Trades of the 3rd Quarter

GuruFocus ranks the Cupertino, California-based tech giant's profitability 9 out of 10 on several positive investing signs, which include a high Piotroski F-score of 7 and operating margins that are outperforming over 95% of global competitors despite declining approximately 4.3% per year on average over the past five years.

Muhlenkamp & Co.'s Top 4 Trades of the 3rd Quarter
Muhlenkamp & Co.'s Top 4 Trades of the 3rd Quarter

Gurus with large holdings in Apple include Warren Buffett (Trades, Portfolio)'s Berkshire Hathaway Inc. (BRK.A)(BRK.B) and Spiros Segalas (Trades, Portfolio).

Muhlenkamp & Co.'s Top 4 Trades of the 3rd Quarter
Muhlenkamp & Co.'s Top 4 Trades of the 3rd Quarter

MasTec

The firm added 74,125 shares of MasTec, increasing the position 80.26% and the equity portfolio 1.62%. Shares averaged $43.03 during the third quarter.

Muhlenkamp & Co.'s Top 4 Trades of the 3rd Quarter
Muhlenkamp & Co.'s Top 4 Trades of the 3rd Quarter

GuruFocus ranks the Florida-based construction company's profitability 7 out of 10 on the heels of expanding operating margins and a return on equity that outperforms over 89% of global competitors.

Muhlenkamp & Co.'s Top 4 Trades of the 3rd Quarter
Muhlenkamp & Co.'s Top 4 Trades of the 3rd Quarter

Kirby

The firm purchased 86,495 shares of Kirby, giving the holding 1.62% equity portfolio weight. Shares averaged $44.12 during the third quarter; the stock is modestly undervalued based on its price-to-GF Value ratio of 0.75.

Muhlenkamp & Co.'s Top 4 Trades of the 3rd Quarter
Muhlenkamp & Co.'s Top 4 Trades of the 3rd Quarter

GuruFocus ranks the Houston-based transportation company's profitability 8 out of 10, driven by a four-star business predictability rank and a three-year revenue growth rate that outperforms 76.54% of global competitors.

Muhlenkamp & Co.'s Top 4 Trades of the 3rd Quarter
Muhlenkamp & Co.'s Top 4 Trades of the 3rd Quarter

Disclosure: The author is long Apple. Apple's third-quarter share price reflects the company's 4-for-1 stock split effective Aug. 31.

Read more here:

  • Top 3rd-Quarter Trades of Ray Dalio's Bridgewater

  • Ken Heebner's Top 5 Trades in the 3rd Quarter

  • 3 Undervalued Canadian Stocks With Strong Margin Growth



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This article first appeared on GuruFocus.