Jeff Auxier Downloads Adobe, Boosts British American Tobacco

Jeff Auxier (Trades, Portfolio), leader of Auxier Asset Management, released his portfolio for the fourth quarter of 2022 earlier this month.

The guru’s Oregon-based firm seeks to invest in “compelling, undervalued” companies that have, among other attributes, strong or improving fundamentals, consistent operating results, a significant competitive advantage, understandable products and a demonstrated ability to earn a high return on capital.

In his quarterly commentary, Auxier discussed “important lessons” from the market correction last year. He wrote:

“Highly valued, popular ‘story stocks’ purchased in times of euphoria can torpedo a portfolio. It is important to identify bubbles and avoid them. When interest rates are close to zero, promoters come out of the woodwork. Talk is cheap. Like Peter Lynch used to say, the key organ when investing is the stomach. These challenging markets underscore the importance of transparency, truly understanding what you own and the ability to quantify risk. Stocks represent a share of a business with a heart and soul.”

Keeping these considerations in mind, 13F filings show Auxier established eight new positions during the three-month period ended Dec. 31, sold out of one stock and added to or trimmed a slew of other existing investments. Among his most notable trades was a new position in Adobe Inc. (ADBE, Financial), a boost to the British American Tobacco PLC (BTI, Financial) holding and reductions of Franklin Resources Inc. (BEN, Financial), Biogen Inc. (BIIB, Financial) and The Travelers Companies Inc. (TRV, Financial).

Investors should be aware 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.

Adobe

Having previously sold out of Adobe (ADBE, Financial) in the third quarter, Auxier invested in a new position of 684 shares, allocating it to 0.04% of the equity portfolio. The stock traded for an average price of $319.83 per share during the quarter.

The San Jose, California-based tech company, which is known for the PDF and its editing software, has a $163.37 billion market cap; its shares closed around $356.85 on Friday with a price-earnings ratio of 35.33, a price-book ratio of 11.73 and a price-sales ratio of 9.54.

The GF Value Line suggests the stock is significantly undervalued currently based on its historical ratios, past financial performance and analysts’ future earnings projections.

At 97 out of 100, the GF Score indicates the company has high outperformance potential. While it received high ratings for profitability, growth, financial strength and GF Value, the momentum rank was more moderate.

Of the gurus invested in Adobe, PRIMECAP Management (Trades, Portfolio) has the largest stake with 1.39% of its outstanding shares. Ken Fisher (Trades, Portfolio), Chuck Akre (Trades, Portfolio) and Philippe Laffont (Trades, Portfolio) also have significant holdings.

British American Tobacco

The guru increased the Britisth American Tobacco (BTI, Financial) holding by 27.08%, buying 28,500 shares. The transaction had an impact of 0.20% on the equity portfolio. Shares traded for an average price of $39.29 each during the quarter.

Auxier now holds a total of 133,760 shares, occupying 0.92% of the equity portfolio. GuruFocus estimates he has lost 0.65% on the long-held investment.

The British tobacco company, which manufactures cigarettes, tobacco and other nicotine products, has a market cap of $85.03 billion; its shares closed at $38.15 on Friday with a price-earnings ratio of 10.83, a price-book ratio of 0.94 and a price-sales ratio of 2.74.

According to the GF Value Line, the stock is fairly valued currently.

The GF Score of 71 implies the company is likely to have average performance going forward, driven by a high profitability rating, middling marks for growth, financial strength and GF Value and a low momentum rank.

With a 0.07% stake, Jeremy Grantham (Trades, Portfolio) is British American Tobacco’s largest guru shareholder. Other top guru investors include Jim Simons (Trades, Portfolio)’ Renaissance Technologies, First Eagle Investment (Trades, Portfolio) and Sarah Ketterer (Trades, Portfolio).

Franklin Resources

The investor curbed the Franklin Resources (BEN, Financial) position by 14.42%, selling 18,700 shares. The transaction impacted the equity portfolio by -0.08%. During the quarter, shares traded for an average per-share price of $24.83.

The guru now holds 110,973 shares in total, representing 0.51% of the equity portfolio. GuruFocus data shows Auxier has lost approximately 19.93% on the investment over its lifetime.

The asset management company, which is headquartered in San Mateo, California, has a $15.68 billion market cap; its shares closed at $31.33 on Friday with a price-earnings ratio of 15.98, a price-book ratio of 1.34 and a price-sales ratio of 1.91.

Based on the GF Value Line, the stock appears to be fairly valued currently.

The GF Score of 85 means the company has good outperformance potential on the back of high ratings for profitability, growth and momentum and more moderate ranks for financial strength and GF Value.

Grantham is Franklin Resources’ largest guru shareholder with a 0.24% stake. Prem Watsa (Trades, Portfolio), the T Rowe Price Equity Income Fund (Trades, Portfolio), Simons’ firm, Joel Greenblatt (Trades, Portfolio), Ray Dalio (Trades, Portfolio)’s Bridgewater Associates, Mario Gabelli (Trades, Portfolio), Jefferies Group (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio) also own the stock.

Biogen

Auxier trimmed the Biogen (BIIB, Financial) holding by 5.72%, selling 1,355 shares. The transaction had an impact of -0.07% on the equity portfolio. The stock traded for an average price of $282.44 per share during the quarter.

He now holds 22,345 shares, which make up 1.07% of the equity portfolio. GuruFocus found Auxier has gained 10.02% on the investment so far.

The Cambridge, Massachusetts-based biotech company, which specializes in treatments for neurological diseases, has a market cap of $40.22 billion; its shares closed at $278.38 on Friday with a price-earnings ratio of 13.30, a price-book ratio of 2.99 and a price-sales ratio of 3.99.

The GF Value Line suggests the stock is modestly overvalued currently.

The company is likely to have poor future performance potential based on its GF Score of 66. Although it raked in high marks for two of the criteria, the growth rank was more moderate and the GF Value and momentum ratings were low.

Of the gurus invested in Biogen, PRIMECAP has the largest stake with 10.90% of its outstanding shares. The Vanguard Health Care Fund (Trades, Portfolio), Steven Cohen (Trades, Portfolio) and Simons’ firm also have notable holdings in the stock.

Travelers

The Travelers (TRV, Financial) investment was reduced by 4.03%, selling 2,101 shares. The equity portfolio was impacted by -0.06%. During the quarter, shares traded for an average price of $179.89 each.

Auxier now holds a total of 49,989 shares, accounting for 1.62% of the equity portfolio. GuruFocus says he has gained an estimated 190.08% on the investment.

The insurance company headquartered in New York has a $43.11 billion market cap; its shares closed at $185.75 on Friday with a price-earnings ratio of 15.81, a price-book ratio of 2 and a price-sales ratio of 1.21.

According to the GF Value Line, the stock is fairly valued currently.

The GF Score of 87 also suggests the company has good outperformance potential due to high ratings for three of the criteria and more moderate ranks for financial strength and GF Value.

With a 0.65% stake, First Eagle is Travelers’ largest guru shareholder. Dalio’s firm, Dodge & Cox, Mairs and Power (Trades, Portfolio), Robert Olstein (Trades, Portfolio), Simons’ firm, Barrow, Hanley, Mewhinney & Strauss and several other gurus also own the stock.

Additional trades and portfolio performance

Other notable trades Auxier made during the quarter included new positions in Delta Air Lines Inc. (DAL, Financial), General Mills Inc. (GIS, Financial), Genuine Parts Co. (GPC, Financial) and Illinois Tool Works Inc. (ITW, Financial) as well as an increased bet on Lowe’s Companies Inc. (LOW, Financial).

Over half of the guru’s $579 million equity portfolio, which is composed of 163 stocks, is invested in the health care, consumer defensive and financial services sectors.

The Auxier Focus Fund returned -4.52% in 2022, outperforming the S&P 500’s -18.11% return.