The firm shelves of Frank Sands Sh
Frank sands (Trades, Portfolio), CEO and CIO of Sands Capital Management, announced a downsizing of his company Grocery Outlet Holding Corp. (TO GO, Financial) last week.
The Arlington, Va. Based value investing firm, which was founded by Sands’ father in 1992, approaches stock selection with the belief that over time stock prices reflect earnings growth. of the underlying company. Using a fundamental, business-driven process, the investment team searches for a concentrated number of high-quality, wealth-creating growth opportunities to hold for the long term.
According to GuruFocus Real-Time Picks, a premium feature, the company reduced its stake in the Emeryville, Calif.-Based discount supermarket chain by 54.27%, selling 4.6 million shares. The stock was trading at an average price of $ 33.12 per share on trade day.
Sands Capital still owns 3.8 million shares, giving it 0.25% space in the equity portfolio. GuruFocus estimates that the company has lost 6.1% on investment since its inception in the second quarter of 2020.
Grocery Outlet, which operates supermarkets with discounted, overstocked, and liquidation products from branded and private label suppliers in California, Oregon, Washington, Idaho, Nevada and Pennsylvania, has a market cap of 3 , 07 billion dollars; its shares were trading at around $ 31.87 on Monday with a price-to-earnings ratio of 28.15, a price-to-book ratio of 3.23 and a price-to-sell ratio of 1.01.
The Peter Lynch chart shows that the stock is trading above its fair value, suggesting that it is overvalued.
On May 11, Grocery Outlet released its first quarter results. It posted earnings of 19 cents per share, while net income rose 49.4% from the last year quarter to $ 18.9 million. Net sales, however, were down 1% from a year ago to $ 752.5 million.
In a statement, CEO Eric Lindberg expressed his satisfaction with the performance of Grocery Outlet.
“As our markets begin to reopen, we believe we are well positioned for long-term growth due to our deep value orientation, strong relationships with our customers and suppliers and significant space opportunities. white, ”he said. “We remain committed to our long-term algorithm of expanding our store base by 10% each year while continually reinvesting in our business. We will continue to implement our strategic initiatives that support consistent long-term growth and generate shareholder value. “
The company is expected to release its second quarter results after the closing bell on August 10.
Grocery Outlet’s financial strength and profitability were both rated 4 out of 10 by GuruFocus. Despite adequate interest coverage, the Altman Z-Score of 2.77 indicates that the company is under some pressure as debt ratios are underperforming relative to the rest of the industry.
The company is also supported by margins and returns on equity, assets and capital that surpass at least half of its competitors. Grocery Outlet has a high Piotroski F-Score of 7, indicating that operations are healthy.
In addition to the moderate insider sales over the past few months, there have also been a few gurus sales. While Sands’ company remains Grocery Outlet’s largest guru shareholder with 4.04% of the shares outstanding,
Pioneering investments (trades, portfolio) and
Jim simons (Trades, Portfolio) ‘Renaissance both reduced their holdings slightly in the first quarter of the year.
Jerome Dodson (Trades, Portfolio) ‘s company also owns the stock, but has not made any changes to its position since 2020.
Portfolio composition and performance
About half of Sands’ $ 51.75 billion equity portfolio, which consisted of 75 stocks at the end of the first quarter, is invested in the communications services and technology sectors, followed by smaller representations. the consumer discretionary and healthcare sectors.
The other stocks held by the guru’s company in the consumer defensive sector are Dollar General Corp. (DG, Financial), New Oriental Education & Technology Group Inc. (EDU, financial) and Chegg Inc. (CHGG, Financial).
GuruFocus data shows that the company’s Select Growth Fund returned 71.4% in 2020, outperforming the 18.4% return of the S&P 500.