While the market continues to contend with a potential recession as the first half of the year prepares to come to a close in a few weeks, a couple stocks in Daniel Loeb (Trades, Portfolio)’s equity portfolio have retreated near their 52-week lows.
In contrast, after returning -18.11% in 2022, the S&P 500 Index has gained around 16% so far this year.
Picking stocks using an event-driven, value-oriented approach, the guru’s New York-based firm, Third Point, is known for entering activist positions in underperforming companies with a catalyst that will help unlock value for shareholders.
The first-quarter 13F filing showed his equity portfolio consisted of 46 stocks, which was valued at $6.11 billion. Loeb’s holdings have posted mostly strong performances so far in 2023, with only six of the top 20 positions declining.
In his letter to shareholders for the three months ended March 31, Loeb noted the firm’s returns “lagged the indices despite strong performance from several new investments.” Further, its shorts and hedges were also a “significant drag on performance.”
Although he sees “some encouraging signs that inflation is moderating,” the investor said he remains concerned about the Federal Reserve’s monetary policy as its “push-pull dynamic” is creating a risk of “breaking things” in the asset markets.
“Our strategy is to preserve liquidity and buying power to take advantage of markets when they ‘break,’” he wrote. “While overall indices remain elevated, we are finding more chances to provide liquidity across all three asset classes in which we invest – credit, structured credit, and equity – opportunities which have been key drivers of performance for the fund. Our portfolio is balanced across industries with a focus on event -driven names including companies involved in spin -offs, significant cost-cutting, or other types of under-appreciated business transformation.”
As of June 16, Loeb’s stocks that have collapsed to near their lowest prices in a year are UnitedHealth Group Inc. (UNH, Financial) and International Flavors & Fragrances Inc. (IFF, Financial).
Investors should be aware 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
UnitedHealth
UnitedHealth’s (UNH, Financial) shares have gained 2.60% over the past year, but have fallen nearly 11% year to date. The stock is currently 4.73% above its annual low of $445.68.
The guru owns 335,000 shares of the company, which represent 2.59% of his equity portfolio.
The Minnetonka, Minnesota-based company, which offers managed health care and insurance services, has a $431.45 billion market cap; its shares were trading around $463.41 on Friday with a price-earnings ratio of 21.19, a price-book ratio of 5.31 and a price-sales ratio of 1.34.
The GF Value Line suggests the stock is modestly undervalued currently based on its historical ratios, past financial performance and analysts’ future earnings estimates.
At 97 out of 100, the GF Score indicates the company has high outperformance potential. While UnitedHealth received solid ratings for profitability, growth, financial strength and momentum, the value rank is more moderate.
The company also has a perfect predictability rank of five out of five stars. GuruFocus research found companies with this rank return an average of 12.1% annually over a 10-year period.
Of the gurus invested in UnitedHealth, the Vanguard Health Care Fund (Trades, Portfolio) has the largest stake with 0.63% of its outstanding shares. Dodge & Cox, Andreas Halvorsen (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies Jeremy Grantham (Trades, Portfolio) and Ruane Cunniff (Trades, Portfolio) also have large positions in the stock.
International Flavors & Fragrances
Shares of International Flavors & Fragrances (IFF, Financial) have tumbled more than 25% over the past year. The stock is currently trading 4.83% above the annual low of $76.11.
Loeb holds 2.55 million shares currently, which occupy 3.84% of the equity portfolio as the eighth-largest position.
The company headquartered in New York, which produces flavors, fragrances and cosmetic actives for a number of end markets, has a market cap of $20.20 billion; its shares were trading around $79.20 on Friday with a price-book ratio of 1.14 and a price-sales ratio of 1.66.
According to the GF Value Line, the stock is a possible value trap currently. Therefore, potential investors should do thorough research before making a decision.
The GF Score of 70 indicates the company has poor performance potential. Although International Flavors & Fragrances raked in high profitability and value ratings, the financial strength and momentum ranks are more moderate and growth is low.
The company also has a one-star predictability rank, which is on watch due to slowing revenue per share growth.
With a 1.21% stake, First Pacific Advisors (Trades, Portfolio) is International Flavors & Fragrances’ largest guru shareholder. Other top guru investors include Steven Romick (Trades, Portfolio), the T Rowe Price Equity Income Fund (Trades, Portfolio), Andreas Halvorsen (Trades, Portfolio), the Parnassus Value Equity Fund (Trades, Portfolio), Carl Icahn (Trades, Portfolio) and Barrow, Hanley, Mewhinney & Strauss.
