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Bill Nygren Buys Amazon, Curbs Humana Investment – Forbes

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Summary

  • The guru established a stake in Amazon
    AMZN
    .
  • He also reduced his Humana
    HUM
    position by 74.12%.
  • Nygren sold out of Constellation
    DAG
    Brand
    STZ
    s, Keurig Dr Petter and DXC Technology
    DXC
    .

Bill Nygren (Trades, Portfolio) disclosed the Oakmark Fund’s second-quarter portfolio earlier this week.

To achieve long-term capital appreciation, the renowned guru, who also manages the Chicago-based firm’s Select and Global Select funds, usually invests in mid- and large-cap companies. When picking stocks, he looks for growing companies that have shareholder-oriented management teams. According to the fund’s fact sheet, he prefers to take a position when the stock is trading at a substantial discount to his estimate of intrinsic value, then waits for the gap between the two to close before selling.

In his market commentary for the three months ended June 30, Nygren discussed the “bad quarter” as the S&P 500 Index entered a bear market after falling more than 20%. He wrote:

“We encourage investors to take advantage of increased volatility and price declines. If you began the year with your assets appropriately divided across cash, bonds and equities, the large declines in bonds and equities have increased the percentage of your portfolio represented by cash. Investing some of that cash now would move you back to your target weightings. As value investors, most of the Oakmark managers are wired to buy opportunistically, especially after declines.”

Keeping these considerations in mind, the NPORT-P filing showed Nygren established six new positions during the quarter, sold out of seven stocks and added to or trimmed a slew of other existing investments. Notable trades included a new stake in Amazon.com Inc. (AMZN, Financial), a reduced bet on Humana Inc. (HUM, Financial) and the divestment of the Constellation Brands Inc. (STZ, Financial), Keurig Dr Pepper Inc. (KDP, Financial) and DXC Technology Co. (DXC, Financial) holdings.

Investors should be aware that, just like 13F reports, NPORT-P reports do not provide a complete picture of a guru’s holdings to the public. Filed by certain mutual funds after each quarter’s end, they collect a wide variety of information on the fund for the SEC’s reference, but in general, the only information made public is in regard to long equity positions. Unlike 13Fs, they do require some disclosure for long equity positions in foreign stocks. Despite their limitations, even these limited filings can provide valuable information.

Amazon

The guru invested in 2.53 million shares of Amazon (AMZN, Financial), allocating 2.04% of the equity portfolio to the stake. The stock traded for an average price of $125.73 per share during the quarter.

The Seattle-based e-commerce giant has a $1.31 trillion market cap; its shares were trading around $127.87 on Tuesday with a price-earnings ratio of 115.01, a price-book ratio of 9.95 and a price-sales ratio of 2.71.

The GF Value Line
VALU
suggests the stock is significantly undervalued currently based on historical ratios, past financial performance and analysts’ future earnings estimates.

In his commentary, Nygren remarked on Amazon’s “strong customer loyalty and massive infrastructure.” Based on these factors, along with the purchase price and valuation of Amazon Web Services, he felt investors are not “paying much of anything for the immensely valuable e-commerce franchise.”

GuruFocus rated Amazon’s financial strength 6 out of 10. In addition to adequate interest coverage, the company has a high Altman Z-Score of 4.26, indicating it is in good standing even though assets are building up at a faster rate than revenue is growing. The return on invested capital is being overshadowed by the weighted average cost of capital, however, so the company is struggling to create value as it grows.

The company’s profitability scored a 9 out of 10 rating due to operating margin expansion, strong returns on equity, assets and capital that top over half of its competitors and a moderate Piotroski F-Score of 5 out of 9, meaning conditions are typical for a stable company. As a result of a slowdown in revenue per share growth, Amazon’s predictability rank of five out of five stars is on watch. According to GuruFocus research, companies with this rank return an average of 12.1% annually over a 10-year period.

Of the many gurus invested in Amazon, Ken Fisher (Trades, Portfolio) has the largest stake with 0.48% of its outstanding shares. Baillie Gifford (Trades, Portfolio), Frank Sands (Trades, Portfolio), Al Gore (Trades, Portfolio), Warren Buffett (Trades, Portfolio), Steve Mandel (Trades, Portfolio), Andreas Halvorsen (Trades, Portfolio), Chris Davis (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio) and several other gurus also have significant positions in the stock.

Humana

The investor curbed the Humana (HUM, Financial) holding by 74.12%, selling 610,000 shares. The transaction had an impact of -1.58% on the equity portfolio. During the quarter, shares traded for an average price of $444.79 each.

Nygren now holds 213,000 shares total, which represent 0.76% of the equity portfolio. GuruFocus estimates he has gained 40.69% on the investment so far.

The health insurance company headquartered in Louisville, Kentucky has a market cap of $61.75 billion; its shares were trading around $486.57 on Tuesday with a price-earnings ratio of 19.92, a price-book ratio of 3.99 and a price-sales ratio of 0.70.

According to the GF Value Line, the stock is fairly valued currently.

Humana’s financial strength was rated 6 out of 10 by GuruFocus. Despite the company issuing new long-term debt over the past three years, it is at a manageable level since the company has sufficient interest coverage. The ROIC also eclipses the WACC, indicating value is being created.

The company’s profitability fared better with an 8 out of 10 rating, driven by strong margins and returns that outperform a majority of industry peers. Humana also has a high Piotroski F-Score of 7, suggesting operations are healthy. Due to consistent earnings and revenue growth, it also has a three-star predictability rank. GuruFocus data shows companies with this rank return an average of 8.2% annually.

With a 1.73% stake, the Vanguard Health Care Fund (Trades, Portfolio) is the company’s largest guru shareholder. Other top guru investors of Humana include Diamond Hill Capital (Trades, Portfolio), Barrow, Hanley, Mewhinney & Strauss, Steven Cohen (Trades, Portfolio), Hotchkis & Wiley and Lee Ainslie (Trades, Portfolio).

Constellation Brands

Impacting the equity portfolio by -2.11%, Nygren exited the 1.5 million-share position in Constellation Brands (STZ, Financial). The stock traded for an average per-share price of $243.17 during the quarter.

GuruFocus says he gained an estimated 35.30% on the investment over its lifetime.

The New York-based company, which produces and markets beer, wine and spirits, has a $46.98 billion market cap; its shares were trading around $250.09 on Tuesday with a price-earnings ratio of 37.78, a price-book ratio of 4.09 and a price-sales ratio of 5.35.

Based on the GF Value Line, the stock appears to be modestly overvalued.

GuruFocus rated Constellation’s financial strength 5 out of 10 on the back sufficient interest coverage. The Altman Z-Score of 3.44 also indicates the company is in good standing even though assets are building up at a faster rate than revenue is growing. The ROIC exceeds the WACC, so value creation is occurring.

The company’s profitability fared better, scoring an 8 out of 10 rating due to an expanding operating margin and returns that are outperforming versus competitors. Constellation also has a moderate Piotroski F-Score of 4 and a one-star predictability rank. GuruFocus found companies with this rank return, on average, 1.1% annually.

Jeremy Grantham (Trades, Portfolio) is now the company’s largest guru shareholder with a 0.38% holding. Ray Dalio (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Cohen, Diamond Hill, PRIMECAP Management (Trades, Portfolio), Robert Karr (Trades, Portfolio) and several other gurus also have positions in Constellation Brands.

Keurig Dr Pepper

With an impact of -1.94% on the equity portfolio, the guru dumped all 8.57 million shares of Keurig Dr Pepper (KDP, Financial). The stock traded for an average price of $36.32 per share during the quarter.

GuruFocus data shows he gained approximately 15.98% on the investment since establishing it in the third quarter of 2020.

The beverage company headquartered in Burlington, Massachusetts, which manufactures K-Cup coffee pods for Keurig brewers as well as other soft drinks, has a market cap of $54.61 billion; its shares were trading around $38.56 on Tuesday with a price-earnings ratio of 25.38, a price-book ratio of 2.14 and a price-sales ratio of 4.16.

The GF Value Line suggests the stock is fairly valued currently.

Keurig’s financial strength was rated 5 out of 10 by GuruFocus. In addition to insufficient interest coverage, the Altman Z-Score of 1.76 warns the company could be at risk of bankruptcy. The WACC also surpasses the ROIC, so it is struggling to create value.

The company’s profitability scored a 7 out of 10 rating, driven by operating margin expansion. Its returns, however, are underperforming over half of its industry peers. Keurig Dr Pepper is also being supported by a high Piotroski F-Score of 7. Although it has recorded a decline in revenue per share growth in recent years, the company still has a one-star predictability rank.

Of the gurus invested in Keurig Dr Pepper, Simons’ firm has the largest stake with 0.49% of its outstanding shares. Dalio, Robert Olstein (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Grantham, Ainslie, Jeff Auxier (Trades, Portfolio) and Caxton Associates (Trades, Portfolio) also own the stock.

DXC Technology

The investor closed the 6.52 million-share holding in DXC Technology (DXC, Financial), which had an impact of -1.27% on the equity portfolio. During the quarter, the stock traded for an average per-share price of $31.05.

GuruFocus projects Nygren lost an estimated 19.82% on the investment, which was established in the third quarter of 2019.

The Ashburn, Virginia-based provider of information technology services has a $5.60 billion market cap; its shares were trading around $24.36 on Tuesday with a price-earnings ratio of 11.02, a price-book ratio of 1.19 and a price-sales ratio of 0.38.

According to the GF Value Line, the stock is currently modestly undervalued.

GuruFocus rated DXC Technology’s financial strength 5 out of 10. In addition to poor interest coverage, the company is being weighted down by a low Altman Z-Score of 1, which cautions it may be in danger of going bankrupt. It is also struggling to create value since the WACC outshines the ROIC.

The company’s profitability scored a 6 out of 10 rating. Despite having declining margins, returns are outperforming over half of its competitors. DXC Technology also has a high Piotroski F-Score of 8, but the one-star predictability rank is on watch as a result of a decline in revenue per share.

With a 3.45% stake, Larry Robbins (Trades, Portfolio) is DXC Technology’s largest guru shareholder. It is also being held by Dalio, Greenblatt and Chris Davis (Trades, Portfolio).

Additional trades and portfolio performance

During the quarter, Nygren also entered positions in Masco
MAS
Corp. (MAS, Financial), Oracle
ORCL
Corp. (ORCL, Financial), Liberty Broadband Corp. (LBRDK, Financial), Parker Hannifin Corp. (PH, Financial) and The Walt Disney
DIS
Co. (DIS, Financial).

The Oakmark Fund’s $13.19 billion equity portfolio, which is composed of 56 stocks, is most heavily invested in the financial services sector.

GuruFocus data shows the fund returned 34.2% in 2021, outperforming the S&P 500’s 28.7% return.

Disclosures

I/we have no positions in any stocks mentioned, and have no plans to buy any new positions in the stocks mentioned within the next 72 hours.

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How to Start Investing With Little Money – Yahoo Canada Finance

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analyze data

Written by Tony Dong at The Motley Fool Canada

Successful investing involves holding a diversified portfolio of stocks, staying the course, and making consistent contributions. All of this helps take advantage of compound interest, which Albert Einstein described as “the eighth wonder of the world.”

Still, for investors starting out with less money (think $1,000ish), investing can be daunting. Some stocks have high share prices that can be a barrier to entry for new investors. Trying to buy enough shares of different companies to stay diversified can be difficult.

This can be discouraging, but fear not! There is a solution if you’re strapped for cash. With this alternative, even the smallest of investment portfolios can grow strongly.

ETFs are the solution

Thanks to exchange-traded funds (ETFs), investors no longer need vast sums of money to buy dozens of individual stocks. ETFs can hold a basket of up to thousands of various stocks. Some ETFs are basically all-in-one stock portfolios that are managed on your behalf by a professional. They trade on exchanges like any other stock with their own ticker symbol.

This approach is capital efficient. For instance, an ETF might trade at a price of $20 per share yet hold over 1,000 stocks in it. With your $1,000, you can now buy 50 shares of that ETF and gain proportional exposure to all of its underlying companies. This way, you become diversified without needing to buy 1,000 different stocks!

Index ETFs are ideal

ETFs do have a cost, though — the management expense ratio (MER). This is a percentage fee deducted from your investment on an annual basis. For example, an ETF that charges a 0.05% MER would cost an annual fee of 0.05 * $1,000 = $5 on your $1,000 investment.

Keeping this as low as possible is ideal. In general, the ETFs with the lowest MERs are index funds. These are passively managed investments that track an existing stock market index, like the S&P 500. With index funds, fees are low since the fund manager isn’t actively trying to pick stocks, so fund turnover remains at a minimum.

I like the S&P/TSX 60 Index. This index tracks 60 blue-chip, large-cap stocks listed on the TSX. Buying the S&P/TSX 60 is a great way to track the long-term performance of the Canadian stock market while gaining access to a portfolio of dividend stocks.

Why the S&P/TSX 60?

From 2000 to date, the S&P/TSX 60 has returned a compound average growth rate (CAGR) of 6.59% with dividends reinvested. This is a respectable return that could turn your initial $1,000 deposit into six-figures over two decades with modest contributions. Let’s use a real-life example to see this in action.

Imagine you started investing in 2000 as a broke 18-year-old student with just $1,000 to your name. You invest it all in an index fund tracking the S&P/TSX 60. Every month thereafter, you scrounge up $100 and invest it promptly in a disciplined and consistent manner.

After holding the ETF for 22 years, consistently putting in $100 every month, reinvesting all dividends, and never panic selling during crashes (even through the Dot-Com Bubble and the 2008 Great Financial Crisis), you would end up with $126,353.

If you started with more than $1,000, held longer, or contributed more than $100 monthly, your returns would have been even better. With this strategy, maximizing your contribution rate and staying invested is key. Don’t try and time the market!

Do you want to implement this passive, hands-off investing strategy? A great ETF to use is iShares S&P/TSX 60 Index ETF, which has a low MER of just 0.20%. XIU trades at around $30 per share right now, making it accessible to investors with a smaller portfolio.

The post How to Start Investing With Little Money appeared first on The Motley Fool Canada.

Before you consider iShares S&P/TSX 60 Index ETF, you’ll want to hear this.

Our market-beating analyst team just revealed what they believe are the 5 best stocks for investors to buy in September 2022 … and iShares S&P/TSX 60 Index ETF wasn’t on the list.

The online investing service they’ve run for nearly a decade, Motley Fool Stock Advisor Canada, is beating the TSX by 21 percentage points. And right now, they think there are 5 stocks that are better buys.

See the 5 Stocks * Returns as of 9/14/22

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Fool contributor Tony Dong has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

2022

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FPIs pump in Rs 8,600 crore in September; pace of investment slows – Economic Times

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After infusing more than Rs 51,000 crore last month, foreign investors have slowed down the pace of equity buying in India in September so far, as they invested a little over Rs 8,600 crore, on sharp depreciation in rupee. Going forward, Foreign Portfolio Investors (FPIs) are unlikely to buy aggressively amid rising dollar, VK Vijayakumar, Chief Investment Strategist at , said.

Indication of further rate hike by the US Federal Reserve, fears of a recession, depreciating rupee and continued tensions in Russia and Ukraine will affect FPI flows, Basant Maheshwari, smallcase manager and Co-founder, Basant Maheshwari Wealth Advisers LLP, said.

The latest inflow comes following a net investment of Rs 51,200 crore in August and nearly Rs 5,000 crore in July, data with depositories showed.

FPIs turned net buyers in July after nine straight months of net outflows, which started in October last year. Between October 2021 till June 2022, they sold Rs 2.46 lakh crore in the Indian equity markets.

According to the data, FPIs have bought equity to the tune of Rs 8,638 crore during September 1-23.

However, FPI activity has turned highly volatile with alternate bouts of buying and selling. They have sold on seven occasions in this month so far. In fact, in the last two trading sessions, they have pulled out Rs 2,500 crore from the Indian equity markets.

Vijayakumar has attributed increased FPI selling in recent days to rising dollar and rising bond yields in the US.

In addition, the 75 basis points (bps) rate hike by the US Fed for the third consecutive time to control rising inflation and the surging dollar have impacted FPI buying, Wealth Advisers LLP’s Maheshwari said.

“The US Fed’s hawkish tone on interest rates and the fear of a global recession fuelled pessimism among investors,” Shrikant Chouhan, Head – Equity Research (Retail), Kotak Securities, said.

Foreign investors have been slowing down their equity buying in India since September. The scenario turned adverse after a hotter-than-expected inflation report dashed hopes that the US Fed would scale down its rate hikes in the coming months.

The August US inflation edged 0.1 per cent higher from the preceding month to 8.3 per cent. Compared to one year ago, it eased as it was 8.5 per cent previously.

The aggressive stance of the central bank chair, which made it apparent that the Fed will once again go for another 75 bps hike for the fourth consecutive time in its next meeting as well, dented sentiments and turned investors risk averse towards emerging markets like India, Himanshu Srivastava, Associate Director – Manager Research, Morningstar India, said.

Also, currency movement is another factor that FPIs track very closely as it has a significant impact on the returns that they make on their investments in any country. Therefore, the outflows tend to accelerate in a scenario of rapid currency depreciation.

The sharp depreciation in Rupee as it touched all-time low of Rs 81.09 against the dollar does not augur well for foreign investments, he added.

“With the dollar index above 111 and the US 10-year bond yield above 3.7 per cent FPIs are unlikely to buy aggressively, going forward. The situation will change if the dollar index and US bond yields decline,” Vijayakumar said.

In addition, foreign investors have pumped in Rs 5,903 crore in the debt market during the month under review.

Apart from India, FPI flows were positive for Indonesia and Philippines, on the other hand, South Korea, Taiwan and Thailand witnessed outflows during the period under review.

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Top 3 investment bets for millennials to beat market volatility and make money – Economic Times

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There is a thrill for many to do things that are so-called out of the ordinary. As mentioned in the first part of this story, millennials are the impatient investor class who are all up to ignore the stereotypes, bet even on riskier investments.

On that note, in the first part we talked about three new-age investments that go beyond the ordinary for the millennials or the digital natives. To know more about millennials and more about the investment options, you can read the first part here:
Top 3 new-age investment bets for millennials looking to take risk and earn big

Nonetheless, it is never bad to be cautious. A roller coaster ride is fun at the amusement parks but when it comes to using the hard-earned money, no one will be keen to lose their savings. It is often said volatility is the daily crux of the market. Experts also opine it can be a motivation to capitalize on the imbalances.

“Volatility is the ghost that haunts you only if you look at it. The best way to avoid volatility is to ignore it; don’t trade into a market when there’s euphoria or out of it when there’s panic. Instead, constrict and hold a diversified portfolio for the long term, or better still, a mutual fund, which isolates individuals from volatility shocks,” Utkarsh Sinha, managing director at boutique investment bank firm Bexley Advisors said.

The economy too is at a volatile juncture with slower-than-expected growth recovery and galloping inflation. For stocks, the plausibility of earnings growth is diluting and valuation is said to trade below the long-term average. So, what could be better than to have some safe options even during a volatile period, enjoy the thrills of new-age investments and still achieve the monetary goals?

Girirajan Murugan, the chief executive officer at FundsIndia, lists more instruments that will help millennials to avoid some volatility:

InvIT – Infrastructure Investment Trust

This involves a trust channeling investments from individuals/institutions toward infrastructure projects. In a developing country like ours, the demand for good infrastructure is huge and perennial, in my opinion, Murugan said, adding that an investment in an InvIT with a good management will be a fruitful investment for the long term.

However, most infrastructure projects are subject to government regulations and interference. Change in the political space could affect such investments. Lack of choices to choose from is a severe disadvantage. Being a budding avenue, the participation in this investment is comparatively low. This means that selling them in the current market could be difficult. However, if the market for this type of investment takes off, then this concern will be void.

REIT – Real Estate Investment Trust

Similar to InvITs, REITs pool resources to invest in real estate assets. “Real estate investment has not lost its flair even today, despite being a conventional investment. That’s exactly why I’d like to call this a “grandfather-approved investment,” Murugan said.

By enabling part ownership, REIT has made real estate more accessible for all sections of people. REIT investments buy you ownership to the property in question, proportionate to the investment made. The income from this asset shall also follow the same proportion.

There are 2 categories of REIT – tradable and non-tradable. Some non-tradable REITs disclose the share values only after 18 months. Non-tradable REITs also carry the disadvantage of less liquidity.

ESG (Environmental, Social and Governance) Investing

In this mode, the investment is directed toward the development of businesses that toil for the betterment of the world. One can either invest through readily available ESG Mutual Funds, or they can identify the right companies and invest in their stocks.

“As far as ESG investing is concerned, it’s a thumbs up from me, and I say this from an ethical standpoint. The reason is that a good planet and a harmonious society are something we can’t survive without. When it boils down to it, man will eventually be forced to choose survival over profitability. If you choose to do it for the purpose, rather than for profitability, this may be one of your best investments,” Murugan said.

ESG assets are on track to exceed $53 trillion by 2025 and represent more than a third of the $140.5 trillion in projected total assets under management (AuM), according to Bloomberg Intelligence.

Bexley Advisors’ Sinha said millennials are at the best point of their lives currently to invest, as they have the bulk of their lives ahead of them. With these options explained, the millennials perhaps have better insight on the options available. Remember how we introduced the generations in the first part of the story and talked about an angry young man from Bollywood? Well, keep the swag and invest with prudence.

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