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Robert Olstein Adds ViacomCBS, NOW to Portfolio

Olstein Capital Management leader Robert Olstein (Trades, Portfolio) released his portfolio for the fourth quarter of 2019 earlier this week, listing two new holdings.


With the goal of achieving long-term capital appreciation, the guru's New York-based firm invests in undervalued companies that have good financial strength, a competitive edge and are able to generate free cash flow. According to its website, the investment team also takes downside risk into consideration before pursuing a position.

Based on these criteria, Olstein established positions in ViacomCBS Inc. (NASDAQ:VIAC) and NOW Inc. (NYSE:DNOW) during the quarter.

ViacomCBS

The guru invested in 259,368 shares of ViacomCBS, allocating 1.69% of the equity portfolio to the holding. The stock traded for an average price of $38.79 per share during the quarter.

The New York-based mass media company, which was formed through the merger of Viacom and CBS in 2019, has a $21.92 billion market cap; its shares were trading around $35.29 on Thursday with a price-earnings ratio of 4.57, a price-book ratio of 2.62 and a price-sales ratio of 0.87.

The Peter Lynch chart shows the stock is trading below its fair value, suggesting it is undervalued.

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GuruFocus also noted the company's price ratios are near multiyear lows, which contributes to its valuation rank of 8 out of 10.

ViacomCBS's financial strength was rated 4 out of 10 by GuruFocus. Although the company has issued approximately $1.7 billion in new long-term debt over the past three years, it is at an acceptable level as a result of adequate interest coverage. The Altman Z-Score of 0.98, however, warns the company is in distress and could be at risk of going bankrupt.

The company's profitability fared much better, scoring an 8 out of 10 rating. Although the operating margin is in decline, it still outperforms a majority of competitors. ViacomCBS is also supported by strong returns, a moderate Piotroski F-Score of 6, which indicates operations are stable, and a business predictability rank of one out of five. According to GuruFocus, companies with this rank typically see their stocks gain an average of 1.1% per annum over a 10-year period.

Of the gurus invested in ViacomCBS, Seth Klarman (Trades, Portfolio) has the largest stake with 3.2% of outstanding shares. Other top guru shareholders are Hotchkis & Wiley, Larry Robbins (Trades, Portfolio), John Rogers (Trades, Portfolio), Ray Dalio (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), NWQ Managers (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Scott Black (Trades, Portfolio).

NOW

Having previously divested of a position in NOW in first-quarter 2015, Olstein picked up a new 20,000-share holding, dedicating 0.03% of the equity portfolio to it. During the quarter, the stock traded for an average price of $11.17 per share.

Headquartered in Houston, the distributor of oil and gas equipment has a market cap of $1.12 billion; its shares were trading around $10.17 on Thursday with a price-earnings ratio of 20.1, a price-book ratio of 0.88 and a price-sales ratio of 0.37.

According to the Peter Lynch chart, the stock is slightly overvalued.

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GuruFocus rated NOW's financial strength 6 out of 10 on the back of a good cash-debt ratio of 1.53 and an Altman Z-Score of 3.08, which suggests the company is financially healthy despite recording a decline in revenue per share over the last five years. The company's return on invested capital, however, is less than its weighted average cost of capital, indicating it may be becoming less efficient.

The company's profitability scored a 4 out of 10 rating on the back of margins that underperform over half of its industry peers and returns that outperform slightly over half of its competitors. NOW also has a high Piotroski F-Score of 7, which indicates operating conditions are healthy.

With 2.83% of outstanding shares, First Eagle Investment (Trades, Portfolio) is the company's largest guru shareholder. Jim Simons (Trades, Portfolio)' Renaissance Technologies, Greenblatt, Jones, Pioneer and Chuck Royce (Trades, Portfolio) also have positions in the stock.

Additional trades and portfolio performance

During the quarter, Olstein also added to a number of holdings, including Booking Holdings Inc. (NASDAQ:BKNG), The Middleby Corp. (NASDAQ:MIDD), Cisco Systems Inc. (NASDAQ:CSCO), DuPont de Nemours Inc. (NYSE:DD), Alphabet Inc. (NASDAQ:GOOG), Corteva Inc. (NYSE:CTVA), Cracker Barrel Old Country Store Inc. (NASDAQ:CBRL) and eBay Inc. (NASDAQ:EBAY), among others.

The guru's $645 million equity portfolio, which is composed of 110 stocks, is largely invested in the industrials, financial services and consumer cyclical sectors.

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According to its website, the Olstein All Cap Value Fund returned 27.15% in 2019, outperforming the Russell 3000 Value Index's 26.26% return.

Disclosure: No positions.

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This article first appeared on GuruFocus.