Glenview Capital’s Major New Positions
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Wall Street analysts take a fine-tooth comb to hedge fund 13F filings, watching how managers scale in and out of positions or initiate new ones. They can be a great determiner of what’s hot and what’s not, and being able to decipher which new positions a hedge fund manager is building could mean getting in at the bottom when he or she does as well. Glenview Capital’s recent 13F from September 2012 is no exception and provides five gems that the fund uncovered going into the end of the year. Continue reading for our quick take on these five equities in Glenview’s portfolio.
Beat-up retailer J.C. Penney (NYSE: JCP) took quite the stumble last year, having to watch its stock price fall almost in half. The current price of $18.79 is light years from its 52-week high of $43.18, but that is a major reason value-seekers have piled into JCP at these price points. Betting on a significant turnaround, several hedge funds have joined Glenview Capital in hoping for a profitable transformation, but they will most likely be in for the long haul. Glenview now holds 1.8% of his $6.1 billion fund in the merchandiser but will have to continue to weather the storm of negative earnings, heavy misses, and multiple downgrades. Short-term traders stay away; this play is for those willing to hold on for years to come.
Glenview’s second largest position to be initiated is the ubiquitous outdoor advertiser Lamar Advertising (NASDAQ: LAMR). The $4 billion company had a positive 2012, garnering investors with a double-digit rate of return, but that may mean an overvalued 2013, as it is trading at the highest PEG of Glenview’s top five largest new positions. However, analysts continue to favor the company’s sprawling billboard business but are reticent about giving the stock a buy rating, rather emphasizing a focus on holding for those already invested. We mirror their convictions and feel like value is readily available elsewhere (Read about another hedge fund manager who has more than 28% of his portfolio in Lamar).
Community Health Systems (NYSE: CYH) was Glenview’s third addition. The healthcare service provider should feel at home in the hedge fund’s holdings, where over 30% of the funds assets under management are employed in the medical and healthcare industries (see which other health stock Glenview likes). CYH has been a steady riser, consistently beating earnings in 2012 and being rewarded positive marks by Morgan Stanley, BofA/Merrill Lynch, and JP Morgan in the last month alone. Forward P/E stands at 9 and reflects a drop from trailing P/E; coupled with a relatively low PEG ratio (under 1), we agree with the big banks in anticipating higher earnings and continued growth in 2013.
The fourth position built in Q3 2012 was in B/E Aerospace (NASDAQ: BEAV). The company primarily makes cabin products for commercial and business aircraft and is a favorite amongst sell-side analysts, with a vast majority viewing a buying opportunity in the stock. Price targets a year from now average out to $56.18, and with BEAV currently trading around $36.50, Wall Street is expecting a gain of almost 14%. B/E Aerospace continues to make strides in their niche, being awarded $250 million worth of contracts to outfit various airlines’ cabins last month alone. A continued bull-market in 2013 could keep airline passengers buying tickets, putting money in the pockets of those airlines to renovate and update new and existing cabins, meaning more upside for BEAV.
Finally, CIT Group (NYSE: CIT) rounds out Glenview’s latest large additions, increasing the fund’s modest financial holdings. The company provides commercial financing and leasing products to companies that fall in the middle market or smaller size segments. Earnings estimates for the previous quarter (due out Jan. 29) are hopeful, but peeling back the cover reveals three negative earnings reports in a row in 2012. Quarterly revenue growth was equally disappointing and decidedly negative versus a year prior, so Glenview may just be hoping to capitalize on an expected positive increase in the beginning of 2013. Watch out for a drop in share price if they miss their estimates, and pull out completely if reported earnings fall back into the negative.
This article is written by Eric Winter and edited by Meena Krishnamsetty. They don't own shares in any of the stocks mentioned in this article. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!