Summary
- STORE Capital, Charter Communications
CHTR , T-Mobile and RH are presenting potential value opportunities.
The markets aren’t even a month into the new year and a few Warren Buffett (Trades, Portfolio) stocks are already trading near their 52-week lows.
As the market continues to contend with the Covid-19 pandemic amid new strains like the Omicron variant, as well as rising inflation and supply shortages, four stocks in the guru’s Berkshire Hathaway (BRK.A, Financial)(BRK.B, Financial) equity portfolio have dived.
Similarly, after posting a 28.7% total return for 2021, the S&P 500 Index has fallen around 4.68% so far this month.
Despite there being many buying opportunities across different sectors following the coronavirus crash in March 2020, Buffett, whom many regard as one of the greatest investors of all time, has allowed Berkshire’s cash stockpile to balloon to $149.2 billion. While he said in 2019 he was looking for an “elephant-sized” acquisition, it appears he has yet to find it since during the third quarter he gained only two new positions and added to one other existing holding.
Regarding price, the billionaire investor seeks a margin of safety between a company’s share price and its intrinsic value. Additionally, he advocates for buying “wonderful” companies at “fair” prices instead of fair companies at wonderful prices. Buffett also tends to favor high-quality companies that he understands and have strong moats.
His equity portfolio consisted of 43 stocks as of the three months ended Sept. 30, 2021, which was valued at $293.45 billion. Buffett’s holdings have posted mixed performances so far in 2022, with 11 of the top 20 positions declining.
YTD performance of Buffett’s top 20 holdings.
As of Thursday, the four Buffett stocks that have collapsed to near their lowest prices in a year were STORE Capital Corp. (STOR, Financial), Charter Communications Inc. (CHTR, Financial), T-Mobile US Inc. (TMUS, Financial) and RH (RH, Financial).
STORE Capital
Shares of STOR Capital
Price chart for STORE Capital.
Buffett owns 24.4 million shares of the company, reflecting 0.27% of his equity portfolio.
Buffett’s holding history of STORE Capital.
The Scottsdale, Arizona-based real estate investment trust has an $8.71 billion market cap; its shares were trading around $31.94 on Thursday with a price-earnings ratio of 34.34, a price-book ratio of 1.7 and a price-sales ratio of 11.47.
GuruFocus rated STORE Capital’s financial strength 4 out of 10. As a result of issuing approximately $1.1 billion in new long-term debt over the past three years, the company has weak interest coverage. The Altman Z-Score of 1.4 warns it could be in danger of bankruptcy since assets are building up and revenue per share growth has slowed over the past 12 months. The return on invested capital is also being overshadowed by the weighted average cost of capital, indicating the company is struggling to create value as it grows.
The REIT’s profitability scored a 7 out of 10 rating despite having a declining operating margin and returns on equity, assets and capital that are, overall, underperforming competitors. STORE Capital also has a moderate Piotroski F-Score of 4 out of 9, meaning conditions are typical for a stable company.
Buffett is STORE Capital’s largest guru shareholder with an 8.95% stake. Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Caxton Associates (Trades, Portfolio) and Mario Gabelli (Trades, Portfolio) also have positions in the stock.
Charter Communications
Charter Communications’ (CHTR, Financial) shares have fallen 10% over the past year. After posting a small decline to close at $581.34 on Wednesday, shares were up 0.77% on Thursday morning. The stock is currently 1.24% above its yearly low of $547.17.
Price chart for Charter Communications.
The Oracle of Omaha owns 4.2 million shares of the company, which represent 1.04% of his equity portfolio.
Buffett’s holding history of Charter Communications.
The telecommunications and mass media company, which is headquartered in Stamford, Connecticut, has a market cap of $105.18 billion; its shares were trading around $585.80 on Thursday with a price-earnings ratio of 26.72, a price-book ratio of 6.17 and a price-sales ratio of 2.28.
Charter Communications’ financial strength was rated 3 out of 10 by GuruFocus. Due to issuing new long-term debt over the past several years, the company has weak interest coverage. The Altman Z-Score of 1.01 also warns the company could be in danger of bankruptcy.
The company’s profitability fared better with a 7 out of 10 rating, driven by operating margin expansion, strong returns that outperform over half of its industry peers and a high Piotroski F-Score of 7, indicating business conditions are healthy. Charter Communications also has a three-star predictability rank on the back of consistent earnings and revenue growth. According to GuruFocus, companies with this rank return an average of 8.2% annually over a 10-year period.
Of the gurus invested in the stock Dodge & Cox has the largest stake with 3.16% of its outstanding shares. Frank Sands (Trades, Portfolio), First Pacific Advisors (Trades, Portfolio), Bill Nygren (Trades, Portfolio), Diamond Hill Capital (Trades, Portfolio), Steven Romick (Trades, Portfolio) and PRIMECAP Management (Trades, Portfolio) are also invested in Charter Communications.
T-Mobile US
Shares of T-Mobile US (TMUS, Financial) have tumbled nearly 20% over the past year. Recording a loss on Wednesday to close at $105.37, shares rose 2.14% on Thursday morning. The stock is currently 1.23% above its annual low of $104.10.
Price chart for T-Mobile US.
The guru owns 5.24 million shares of the company, accounting for 0.23% of his equity portfolio.
Buffett’s holding history of T-Mobile US.
The Bellevue, Washington-based telecommunication services company has a $134.57 billion market cap; its shares were trading around $107.64 on Thursday with a price-earnings ratio of 40.35, a price-book ratio of 1.95 and a price-sales ratio of 1.69.
GuruFocus rated T-Mobile’s financial strength 3 out of 10. In addition to poor interest coverage, the low Altman Z-Score of 1.07 warns the company could be at risk of bankruptcy since its assets are building up at a faster rate than revenue is growing. The WACC also eclipses the ROIC, so the company is struggling to create value.
The company’s profitability fared better, scoring a 6 out of 10 rating on the back of operating margin expansion, returns that underperform around half of its competitors and a moderate Piotroski F-Score of 4. T-Mobile also has a predictability rank of one out of five stars. GuruFocus says companies with this rank return an average of 1.1% annually.
With a 1.02% stake, Dodge & Cox is T-Mobile’s largest guru shareholder. Other top guru investors include Andreas Halvorsen (Trades, Portfolio), David Tepper (Trades, Portfolio), Barrow, Hanley, Mewhinney & Strauss, Nygren, Lee Ainslie (Trades, Portfolio) and PRIMECAP Management (Trades, Portfolio).
RH
RH’s shares have sunk nearly 15% over the past 12 months. Closing with a slight decrease at $415.69 on Wednesday, shares were 2.92% higher on Thursday morning. The stock is currently trading 1.01% above its 52-week low of $411.88.
The renowned investor holds 1.8 million shares of the company, giving it 0.41% space in the equity portfolio.
Buffett’s holding history of RH.
The upscale furniture retailer formerly known as Restoration Hardware, which is headquartered in Corte Madera, California, has a market cap of $9.22 billion; its shares were trading around $428.21 on Thursday with a price-earnings ratio of 20.01, a price-book ratio of 9.15 and a price-sales ratio of 3.66.
RH’s financial strength was rated 4 out of 10 by GuruFocus. Despite having adequate interest coverage, the Altman Z-Score of 2.95 indicates the company is under some pressure. Value creation is occurring, however, since the ROIC exceeds the WACC.
The company’s profitability scored a 7 out of 10 rating. In addition to an expanding operating margin, RH is supported by strong returns that outperform a majority of industry peers and a high Piotroski F-Score of 7. It also has a one-star predictability rank.
Buffett is RH’s largest guru shareholder with an 8.37% stake. Other gurus who own the stock are Steve Mandel (Trades, Portfolio), Daniel Loeb (Trades, Portfolio), Ray Dalio (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio) and Ainslie.
Disclosures
I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
The views of this author are solely their own opinion and are not endorsed or guaranteed by GuruFocus.com.
Source: https://www.forbes.com/sites/gurufocus/2022/01/21/4-warren-buffett-stocks-start-the-new-year-near-52-week-lows/