Michael Dell (Trades, Portfolio)’s MSD Capital disclosed its trades for the first quarter earlier this month.
The private investment firm headquartered in New York, which was established in 1995 to manage the assets of Dell Technologies Inc.’s (DELL, Financial) founder and CEO, oversees an extremely concentrated portfolio of companies that have sustainable, long-term competitive advantages that are run by honest management teams. The firm follows a disciplined, research-intensive analytic investment process.
Sticking to these criteria, the firm’s 13F filing for the three months ended March 31 shows it entered a new position in Safehold Inc. (SAFE, Financial) and boosted the Peloton Interactive Inc. (PTON, Financial) stake.
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.
Safehold
Dell’s firm invested in 5.21 million shares of Safehold (SAFE, Financial), allocating 36.12% of the equity portfolio to the stake. The stock traded for an average price of $29.46 per share during the quarter.
It is now MSD Capital’s second-largest holding.
The New York-based real estate investment trust specializes in ground leases. It helps property owners generate higher returns on the land their buildings are on with less risk. The company operates through five segments, of which Land and Development contributed the largest portion of revenue at 43.30% in 2022.
Safehold has a $1.53 billion market cap; its shares closed at $23.85 on Friday with a price-book ratio of 1.40 and a price-sales ratio of 0.71.
The GF Value Line suggests the stock is modestly undervalued currently based on its historical ratios, past financial performance and analysts’ future earnings projections.
At 43 out of 100, the GF Score indicates the company has weak performance potential. Although it received a high value rating, the profitability rank was more moderate and the growth and financial strength grades were low. It did not receive a momentum rating, however, so its full prospects may not be accurately reflected.
The REIT is being weighed down by a low Piotroski F-Score of 3 out of 9, which means its operations are in poor shape, and a low Altman Z-Score of 0.52, signaling it could be at risk of going bankrupt.
Safehold also has a predictability rank of one out of five stars despite recording a decline in revenue per share. According to GuruFocus research, companies with this rank return an average of 1.1% annually over a 10-year period.
Of the gurus invested in Safehold, Dell’s firm has the largest stake with 8.14% of its outstanding shares. The stock is also being held by PRIMECAP Management (Trades, Portfolio).
Peloton Interactive
The firm increased its holding in Peloton Interactive (PTON, Financial) by 145.60%, picking up 1.12 million shares. The transaction had an impact of 3% on the equity portfolio. During the quarter, shares traded for an average price of $12.03 each.
MSD now holds 1.88 million shares in total, which occupy 5.06% of the equity portfolio as the fourth-largest position. GuruFocus estimates the firm has lost 50.67% on the investment over its short lifetime.
Headquartered in New York, the company is known for its line of internet-connected stationary bicycles, treadmills and rowing machines that can stream live and on-demand fitness classes through a subscription service. While the subscriptions provide recurring sales, the connected fitness products segment contributed over 60% of revenue in 2022.
Peloton has a market cap of $3.06 billion; its shares closed at $8.64 on Friday with a price-sales ratio of 1.04.
According to the GF Value Line, the stock is a possible value trap currently due to a decline in its underlying fundamentals and a buildup in day’s inventory. As such, potential investors should do thorough research before making a decision.
The GF Score of 63 implies the company has poor performance potential on the back of a high growth rank, middling marks for momentum and low profitability, financial strength and value ratings.
Despite having an expanding operating margin, Peloton is being weighed down by a decline in revenue per share, a low Piotroski F-Score of 1 and a weak Altman Z-Score of -2.63.
With a 1.05% stake, Jim Simons (Trades, Portfolio)’ Renaissance Technologies is the company’s largest guru shareholder. Other top guru investors of Peloton include Philippe Laffont (Trades, Portfolio), Baillie Gifford (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Chase Coleman (Trades, Portfolio), Jefferies Group (Trades, Portfolio), David Nierenberg (Trades, Portfolio) and First Pacific Advisors (Trades, Portfolio).
Portfolio composition
The firm did not make any other changes to its holdings.
MSD Capital’s $423 million equity portfolio was composed of five stocks as of the end of the first quarter. The firm’s other three holdings are Life Time Group Holdings Inc. (LTH, Financial), Dine Brands Global Inc. (DIN, Financial) and Townsquare Media Inc. (TSQ, Financial).
By weight, the three sectors represented are consumer cyclical (61.01%), real estate (36.12%) and communication services (2.87%).
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