Hedge fund manager boosts stake in 2 holdings
Steven Cohen adds to his positions in Clearwater Paper and Select Comfort.
Steven Cohen, the billionaire hedge fund manager of SAC Capital Advisors, has been adding to holdings of companies of which he owns a substantial portion, according to GuruFocus' Real Time Picks. Though the SEC requires investors to report their holdings once a quarter, if they own more than 5% of a company, they are required to report any buys and sells within a few days. GuruFocus Real Time Picks reports these trades of gurus' largest holdings.
On May 1, Cohen increased his holding of Clearwater Paper (CLW) 8.8%, adding 132,821 shares at approximately $32 per share, and bringing his total holding to 1,640,000 shares or 6.32% of shares outstanding. Cohen opened his position in Clearwater Paper in the first quarter of 2011 at approximately $20 per share.
Clearwater Paper, a standalone company, produces pulp and paperboard at six facilities across the country, including Lewiston, Idaho, and Las Vegas. Clearwater Paper has a market cap of $780.9 million. Its shares were traded at around $33.03 with a price-to-earnings ratio of 16.8 and price-to-sales ratio of 0.4.
Over the past five years, Clearwater Paper's stock has climbed 482%. In the last year, however, it has tumbled 15.4%. Cohen suggested on May 2 that the company split itself up in order to increase shareholder value.
In the letter, Cohen said that the stock is "deeply undervalued by the public markets." He opined that the parts of the company are worth more separate than in cohesion.
"We believe there may be significant strategic interest in some or all of the Company's assets that could provide additional value for shareholders beyond the standalone analysis," the letter stated.
Clearwater it organized into two operating segments: consumer products, which represents approximately 57% of the company's net sales, and pulp and paperboard, which represents approximately 43%. Clearwater itself spun off of Potlatch Corporation on Dec. 16, 2008, and before that was a wholly owned subsidiary.
The company's operations may have played a part in the depressed market interest in the stock more so than unrecognized value. For instance, the company's return on equity and return on assets have both declined for the three years since 2009. In addition, gross margins were compressed from 15.8% in 2009 to 11.7% in 2011, and net margins from 14.6% in 2009 to 2.1% in 2011. Free cash flow also fell to a negative $52.9 million in 2011 after three years in positive territory.
Cohen also increased his holding of Select Comfort (SCSS) by 1503.95%, or 2,671,372 shares, on April 30 at an average price of $29. Cohen initiated his position in the third quarter of 2010 at an average price of $6.90 per share. The company's stock has been on a near 40% tear year to date.
Select Comfort is engaged in the manufacture, specialty retailing and direct marketing of premium quality, innovative adjustable-firmness beds and other sleep-related products. Select Comfort has a market cap of $1.62 billion. Its shares were traded at around $30.29 with a price-to-earnings ratio of 24 and price-to-sales ratio of 2.2.
Select Comfort reported very positive results for the first quarter ended March 31, 2012. It was its 13th consecutive quarter of double-digit, year-over-year operating income growth. First-quarter earnings were $0.39 per share, a 50% year-over-year increase, and net sales increased 36% to $262 million, compared to $192 million the previous year, driven by company controlled sales growth of 34% -- a quarterly record.
Shelly Ibach, chief operating officer and incoming president and CEO, Select Comfort, stated, "Our record comparable-sales increase in the quarter reflects the strength of our customer-focused growth strategy. We continue to invest in broadening awareness for the differentiated Sleep Number brand and leveraging our position as a national retailer with exclusive, company-controlled distribution. As we look ahead, we are confident in our ability to continue generating earnings-per-share growth of at least 20 percent per year for the foreseeable future."
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