Glenn Greenberg's Top 1st-Quarter Trades
- By Margaret Moran
Glenn Greenberg (Trades, Portfolio)'s Brave Warrior Advisors recently disclosed its portfolio updates for the first quarter of 2021, which ended on March 31.
Greenberg and John Shapiro founded Chieftain Capital Management in 1984, and when the partners split the firm up into two separate companies in 2010, Greenberg's firm was renamed Brave Warrior Investors. Greenberg runs a highly concentrated portfolio, which he holds as a "defense against ignorance," as the more companies you own, the less you know about each. He prefers to invest in companies with little competition, high returns on invested capital and good balance sheet strength that are trading at attractive valuations.
Based on these investing criteria, the firm's top buys for the quarter were Valvoline Inc. (NYSE:VVV) and Anthem Inc. (NYSE:ANTM), while its biggest sells were Credit Acceptance Corp. (NASDAQ:CACC) and Alphabet Inc. (NASDAQ:GOOGL).
Valvoline
The firm established a new holding of 7,647,450 shares in Valvoline (NYSE:VVV), impacting the equity portfolio by 6.51%. During the quarter, shares traded for an average price of $24.93.
Based in Lexington, Kentucky, Valvoline is the owner of the Valvoline Instant Oil Change and Valvoline Express Care chains of car repair centers. It is also the manufacturer and distributor of Valvoline-brand automotive oil, additives and lubricants.
On May 20, shares of Valvoline traded around $32.47 for a market cap of $5.90 billion and a price-earnings ratio of 18.05. According to the GuruFocus Value chart, the stock is significantly overvalued.
The company has a financial strength rating of 4 out of 10 and a profitability rating of 7 out of 10. The cash-debt ratio of 0.12 is lower than 71% of industry peers, but the Piotroski F-Score of 6 out of 9 indicates financial stability. The return on invested capital is consistently higher than the weighted average cost of capital, indicating the company is creating value as it grows.
Anthem
The firm upped its stake in Anthem (NYSE:ANTM) by 392,594 shares, or 50.91%, for a total holding of 1,163,729 shares. The trade had a 4.60% impact on the equity portfolio. Shares traded for an average price of $321.08 during the quarter.
Anthem is a health insurance provider based in Indianapolis. It is the largest for-profit managed care company in the Blue Cross Blue Shield Association with more than 40 million members.
On May 20, shares of Anthem traded around $391.13 for a market cap of $95.76 billion and a price-earnings ratio of 20.92. According to the GF Value chart, the stock is fairly valued.
The company has a financial strength rating of 5 out of 10 and a profitability rating of 7 out of 10. The equity-to-asset ratio of 0.35 and debt-to-equity ratio of 0.69 are both near their respective industry medians. The three-year revenue growth rate is 11.7%, while the three-year Ebitda growth rate is 14.6%.
Credit Acceptance
The firm cut its investment in Credit Acceptance (NASDAQ:CACC) by 451,814 shares, or 99.22%, leaving a remaining holding of 3,548 shares. The trade had a -5.75% impact on the equity portfolio. During the quarter, shares traded for an average price of $362.45.
Credit Acceptance is an automobile financing company based in Michigan. It provides loans and other financial products through a network of dealer-partners, specializing in providing for customers with bad credit or no credit history.
On May 20, shares of Credit Acceptance traded around $431.43 for a market cap of $7.26 billion and a price-earnings ratio of 10.71. According to the GF Value chart, the stock is modestly undervalued.
The company has a financial strength rating of 3 out of 10 and a profitability rating of 9 out of 10. The cash-debt ratio of 0.01 is lower than 94% of peers, though the Altman Z-Score of 2.98 indicates that the risk of bankruptcy is low. The operating margin and net margin have both taken a dive recently to their recent values of 33.36% and 25.22%.
Alphabet
The firm reduced its position in Alphabet (NASDAQ:GOOGL) by 65,855 shares, or 98.96%, leaving a remaining holding of 691 shares. The trade had a -4.25% impact on the equity portfolio. Shares traded for an average price of $1,975.79 during the quarter.
Based in Mountain View, California, Alphabet is a multinational conglomerate that was formed as part of a restructuring of Google in 2015, in which Alphabet became the parent company of Google and several former Google subsidiaries.
On May 20, shares of Alphabet traded around $2,306.95 for a market cap of $1.56 trillion and a price-earnings ratio of 30.70. According to the GF Value chart, the stock is modestly overvalued.
The company has a financial strength rating of 8 out of 10 and a profitability rating of 9 out of 10. The interest coverage ratio of 261.49 and Altman Z-Score of 11.84 indicate a fortress-like balance sheet. The three-year revenue growth rate is 16.5%, while the three-year Ebitda growth rate is 20.2%.
Portfolio overview
As of the quarter's end, the firm held 24 common stock positions valued at $3.06 billion. The top holdings were Anthem with 13.64% of the equity portfolio, Berkshire Hathaway B shares (NYSE:BRK.B) with 11.57% and Aon PLC (NYSE:AON) with 11.49%.
In terms of sector weighting, the firm was most invested in financial services, followed distantly by health care.
Disclosure: Author owns no shares in any of the stocks mentioned. The mention of stocks in this article does not at any point constitute an investment recommendation. Portfolio updates reflect only common stock positions as per the regulatory filings for the quarter in question and may not include changes made after the quarter ended.
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This article first appeared on GuruFocus.
