Billionaire Value Investor Michael Price Adds Specialty Retailer and a REIT to Its 13F Portfolio

Notable value investor and billionaire Michael Price recently has revealed his equity portfolio as of the end of 2016 via a 13F filing submitted with the SEC. Mr. Price founded MFP Investors, his New York-based hedge fund, in 1998 after selling Heine Securities to Franklin Resources for $670 million in 1996. He started as a research assistant at Heine Securities in 1975 and by 1988 became the sole owner of the company.  Heine Securities was considered one of the best fund management companies on the Street before it was acquired.

According to the latest 13F filing by Mr. Price, his equity portfolio at the end of 2016 was worth nearly $824.2 million and was well diversified across sectors. Being a value investor Mr. Price made only few changes in his portfolio during the fourth quarter, which resulted in his equity portfolio experiencing a quarterly turnover of only 18.80% during that time. In this post, we will take a look at the five major moves he made heading into 2017 and will discuss the individual performances of those stocks.

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Cabelas Inc (NYSE:CAB)

– Shares Held By MFP Investors (as of December 31): 210,000

– Value of The Holding (as of December 31): $12.3 Million

Cabelas Inc (NYSE:CAB) was added to MFP Investors’ portfolio during the fourth quarter. Shares of the specialty retailer surged in late-September after Bass Pro, LLC announced that it would acquire the former for $5.5 billion or $65.50 per share. Although Cabelas Inc (NYSE:CAB)’s stock continued to trade above $60 mark for most part of the fourth quarter as a merger-arbitrage play, it has given up most of those gains this year amid skepticism that the deal won’t go through due to tough regulatory hurdles. Currently, Cabelas’s stock is trading near $45, which is a 33% discount to the offer made by Bass Pro and suggests a probability of only 40% of the deal going through. According to analysts at Stifel Nicolaus, the standalone value of Cabelas Inc (NYSE:CAB) is only $34.39 per share, which suggests the stock can drop by as much as 24% if the deal doesn’t go through.

Franklin Resources, Inc. (NYSE:BEN)

– Shares Held By MFP Investors (as of December 31): 347,530

– Value of The Holding (as of December 31): $13.75 Million

MFP Investors nearly doubled its stake in Franklin Resources, Inc. (NYSE:BEN) during the last quarter of 2016. Franklin Resources, Inc. (NYSE:BEN)’s stock fell in 2015 and is still trading down around 25% from the peak it made in 2014. However, since the company has continued to hike its quarterly dividend every year, its forward yield has gone up considerably in the meantime and stands at 1.88% currently. For its fiscal 2016 fourth quarter, the company reported operating expenses of $973.9 million, a decline of 12% year-over-year, and operating margin of 37.6%, which was up 40 basis points from the same quarter of the previous year. However, this didn’t impress analysts at Credit Suisse Group much, who on February 5, reiterated their ‘Sell’ rating and $32 price target on the stock, suggesting a downside of almost 25%.

Taubman Centers, Inc. (NYSE:TCO)

– Shares Held By MFP Investors (as of December 31): 210,000

– Value of The Holding (as of December 31): $15.52 Million

Taubman Centers, Inc. (NYSE:TCO) was another new entrant in MFP Investors’ equity portfolio during the fourth quarter. The Michigan-based real estate investment trust (REIT) currently owns and manages 19 urban and suburban shopping centers in over 10 states and Puerto Rico. In the last three years,  Taubman Centers, Inc. (NYSE:TCO)’s shares have gone nowhere. However, that has helped in increasing its forward yield to 3.53% currently. On February 9, Taubman Centers reported its fourth quarter numbers, declaring funds from operation of $1.01 per share on revenue of $166.19 million, versus analysts’ expectation of $1.02 and $159.05 million, respectively.

Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA)

– Shares Held By MFP Investors (as of December 31): 696,500

– Value of The Holding (as of December 31): $25.25 Million

After having increased its stake in Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) by 6% during the third quarter, MFP Investors again boosted its holding in the beleaguered drug company by 48% during the fourth quarter. Teva Pharmaceutical Industries Ltd (ADR) (NYSE:TEVA) lost almost 45% of its market capitalization last year amid several troubles including ballooning of debt after purchasing Allergan’s generic drug business for over $40 billion, losing patent exclusivity of its bestselling drug Copaxone and allegations that it was part of a price-fixing nexus among generic drug manufacturers. Although a lot of analysts and investors have given up hope on the Israeli drug manufacturer, there are a sizeable number of contrarians who think that the stock has bottomed out now.

BMC Stock Holdings Inc (NASDAQ:BMCH)

– Shares Held By MFP Investors (as of December 31): 3.42 Million

– Value of The Holding (as of December 31): $66.7 Million

Although MFP Investor didn’t make any changes to its stake in BMC Stock Holdings Inc (NASDAQ:BMCH) during the fourth quarter, the company still jumped a spot and became the fund’s top equity holding at the end of December owing to a 10% rise in its stock during the October-December period. The Raleigh, NC-based lumber and building materials distributor got listed on NASDAQ in August 10, 2013 at a price of $17 per share. Since then its stock has appreciated by around 17.5%. Earlier this month, analysts at Barclays PLC initiated coverage on the stock with an ‘Overweight’ rating and $22 price target, suggesting a potential upside of 10%.

Disclosure: None