Summary
Chase Coleman (Trades, Portfolio), founder of Tiger Global Management and one of Julian Robertson (Trades, Portfolio)’s former “tiger cubs,” is known for being an early investor in Facebook and Spotify Technology SA (SPOT, Financial).
The guru’s New York-based hedge fund typically focuses on small-cap stocks and technology startups. It also searches for value opportunities among early-stage venture, late-stage venture, post-initial public offering and secondary market equities.
In the current environment of high inflation, rising interest rates and geopolitical uncertainty, many investors are likely looking for opportunities to take advantage of. As a result, they may be interested in some of the stocks in the guru’s $11.93 billion equity portfolio that are undervalued according to an earnings-based discounted cash flow model.
GuruFocus portfolio data, which is based on 13F filings as of June 30, shows current positions in Coleman’s equity portfolio that have a margin of safety and high predictability are Meta Platforms Inc. (META, Financial), Alphabet Inc. (GOOGL, Financial), Visa Inc. (V, Financial) and Microsoft Corp. (MSFT, 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.
Meta Platforms
Shares of Meta Platforms (META, Financial) are trading at a 66.31% discount to their fair value of $415.33 according to the earnings-based DCF model.
The Menlo Park, California-based social media company, which was formerly known as Facebook, has a $375.34 billion market cap; its shares were trading around $141.67 on Tuesday with a price-earnings ratio of 11.57, a price-book ratio of 3 and a price-sales ratio of 3.25.
The GF Value Line
The GF Value Line suggests the stock is significantly undervalued.
Further, the GF Score of 92 out of 100 indicates the company has good outperformance potential, driven by high ranks for profitability, growth and financial strength and middling marks for GF Value and momentum.
The GF Score shows the company has high outperformance potential.
GuruFocus rated Meta Platforms’ financial strength 8 out of 10 due to adequate interest coverage and a high Altman Z-Score of 7.38 that indicates it is in good standing. The return on invested capital also eclipses the weighted average cost of capital, so value creation is occurring as the company grows.
The company’s profitability fared even better with a 10 out of 10 rating. Despite recording a decline in its margins, Meta is supported by strong returns on equity, assets and capital that outperform a majority of competitors. It also has a moderate Piotroski F-Score of 4 out of 9, indicating conditions are typical for a stable company. The predictability rank of 4.5 out of five stars is on watch even though the company has recorded consistent earnings and revenue growth. According to GuruFocus research, companies with this rank return an average of 10.6% annually over a 10-year period.
Of the gurus invested in Meta, Dodge & Cox has the largest stake with 0.44% of its outstanding shares. Ken Fisher (Trades, Portfolio), Baillie Gifford (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, First Eagle Investment (Trades, Portfolio), Steve Mandel (Trades, Portfolio), Chris Davis (Trades, Portfolio) and Andreas Halvorsen (Trades, Portfolio), among others, also have large holdings.
Alphabet
Alphabet’s (GOOGL, Financial) Class A stock is trading at a 24.48% discount to its DCF fair value of $134.32.
The tech conglomerate headquartered in Mountain View, California, which is the parent company of Google
According to the GF Value Line, the stock is modestly undervalued currently.
The GF Value Line suggests the stock is modestly undervalued.
Raking in high ranks across the board, the GF Score of 97 indicates the company has great outperformance potential.
The GF Score shows the company has high outperformance potential.
Alphabet’s financial strength and profitability were both rated 9 out of 10 by GuruFocus. In addition to a comfortable level of interest coverage, the company is supported by a robust Altman Z-score of 10.49 that indicates it is in good standing. The ROIC also eclipses the WACC, meaning value is being created.
Along with operating margin expansion, the company is supported by strong returns that top a majority of industry peers. It also has a high Piotroski F-Score of 7, which means conditions are healthy. Boosted by steady earnings and revenue growth, Alphabet also has a two-star predictability rank. GuruFocus found companies with this rank return an average of 6% annually.
With 0.05% of its outstanding shares, Spiros Segalas (Trades, Portfolio) is Alphabet’s largest guru shareholder. Other top guru investors include Fisher, PRIMECAP Management (Trades, Portfolio), Dodge & Cox, Frank Sands (Trades, Portfolio), Davis, Diamond Hill Capital (Trades, Portfolio), Hotchkis & Wiley and Bill Nygren (Trades, Portfolio).
Visa
Generating a DCF fair value of $219.43, shares of Visa (V, Financial) are trading with a 15.26% margin of safety.
The San Francisco-based company, which facilitates electronic payments and provides credit card services, has a $390.36 billion market cap; its shares were trading around $185.23 on Tuesday with a price-earnings ratio of 27.32, a price-book ratio of 11.98 and a price-sales ratio of 14.17.
Based on the GF Value Line, the stock appears to be significantly undervalued currently
The GF Value Line suggests the stock is significantly undervalued.
With a GF Score of 99, the company has high outperformance potential due to its good marks across the board.
The GF Score shows the company has high outperformance potential.
GuruFocus rated Visa’s financial strength 7 out of 10. Despite the company issuing new long-term debt in recent years, it was manageable due to sufficient interest coverage. In addition, the high Altman Z-Score of 5.99 indicates it is in good standing. The ROIC also exceeds the WACC, so value is being created.
The company’s profitability fared better, scoring a 10 out of 10 rating as a result of strong margins and returns that outperform a majority of competitors. It also has a high Piotroski F-Score of 8. Visa has recorded consistent earnings and revenue growth, contributing to a five-star predictability rank. GuruFocus data shows companies with this rank return, on average, 12.1% annually.
Fisher has the largest stake in Visa with 0.65% of its outstanding shares. Sands, Warren Buffett (Trades, Portfolio), Chuck Akre (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio), Segalas, Halvorsen, Mandel, Diamond Hill, Steven Cohen (Trades, Portfolio) and Grantham also have notable positions.
Microsoft
With a DCF fair value of $266.76, Microsoft (MSFT, Financial) is trading with a 6.25% margin of safety.
The software company, which is headquartered in Redmond, Washington, has a market cap of $1.85 trillion; its shares were trading around $247.64 on Tuesday with a price-earnings ratio of 25.66, a price-book ratio of 11.09 and a price-sales ratio of 9.40.
The GF Value Line suggests the stock is modestly undervalued currently.
The GF Value Line suggests the stock is modestly undervalued.
The GF Score of 99 further indicates it has high outperformance potential, having received good ratings for each category.
The GF Score shows the company has high outperformance potential.
Microsoft’s financial strength was rated 8 out of 10 by GuruFocus, driven by adequate interest coverage and a high Altman Z-Score of 7.32. The ROIC also outshines the WACC, so value creation is occurring.
The company’s profitability scored a 10 out of 10 rating on the back of an expanding operating margin, strong returns that are outperforming versus industry peers and a high Piotroski F-Score of 7. Steady earnings and revenue growth contributed to Microsoft’s 3.5-star predictability rank. GuruFocus says companies with this rank return an annual average of 9.3%.
With a 0.38% stake, Fisher is the company’s largest guru shareholder. Other gurus invested in Microsoft include PRIMECAP Management (Trades, Portfolio), Dodge & Cox, Baillie Gifford (Trades, Portfolio), Segalas, Al Gore (Trades, Portfolio)’s Generation Investment, Simons’ firm, Mandel, Grantham and Halvorsen.
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.
Source: https://www.forbes.com/sites/gurufocus/2022/10/07/4-stocks-trading-with-a-margin-of-safety-in-colemans-portfolio/