Muhlenkamp & Co. Inc., the investment firm founded by Ronald Muhlenkamp (Trades, Portfolio) in 1977, released its portfolio for the second quarter earlier this month.
While he is still acting as the firm’s chairman, Muhlenkamp passed most operational responsibilities on to his sons in 2019. With the goal of maximizing returns through capital appreciation, as well as income from dividends and interest, his Wexford, Pennsylvania-based firm typically invests in highly profitable companies trading at a discount. When picking stocks, it seeks companies with strong balance sheets and high returns on equity. The firm believes that, over time, stock prices reflect the companies’ underlying value and that the long-term business of investing offers a higher chance of profitability and reliability.
In the firm’s quarterly letter to shareholders, Muhlenkamp noted that he is “less certain” that the U.S. will enter a recession, but that it is still possible. He also commented on inflation, interest rates and the ongoing financial crisis.
“For the reasons we just outlined, we are more optimistic than three months ago but still cautious about the investing environment,” he wrote. “Our investing actions have matched our modest shift in outlook and we have added several new companies to our portfolios that we believe to be selling at attractive prices.”
Keeping these considerations in mind, the firm disclosed in its 13F filing it entered six new positions, sold out of two stocks and added to or trimmed a slew of other existing holdings during the three months ended June 30. The most notable trades included new positions in the SPDR S&P Regional Banking (KRE, Financial) exchange-traded fund, BGC Group Inc. (BGC, Financial) and Transocean Ltd. (RIG, Financial), a reduced bet on the Alerian MPL ETF (AMLP, Financial) and the divestment of the ProShares Short QQQ -1x Shares (PSQ, Financial) ETF.
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.
SPDR S&P Regional Banking ETF
The firm picked up 904,875 shares of the SPDR S&P Regional Banking ETF (KRE, Financial), dedicating 3.61% of the equity portfolio to the position. The stock traded for an average price of $40.75 per share during the quarter.
The ETF, which follows the performance of the S&P Regional Banks Select Industry Index, was trading around $46.64 on Wednesday.
The stock has fallen around 18.72% year to date.
The 14-day relative strength index of 66.81 indicates the ETF is close to overbought levels.
Of the gurus invested in the ETF, George Soros (Trades, Portfolio) has the largest position with 0.57% of its outstanding shares. Steven Cohen (Trades, Portfolio), Jefferies Group (Trades, Portfolio), Mario Gabelli (Trades, Portfolio) and Keeley-Teton Advisors, LLC (Trades, Portfolio) also have positions.
BGC Group
Muhlenkamp’s firm invested in 1.56 million shares of BGC Group (BGC, Financial), allocating 2.46% of the equity portfolio to the stake. Shares traded for an average price of $4.45 each during the quarter.
The New York-based brokerage and financial technology company has a $2.08 billion market cap; its shares were trading around $4.77 on Wednesday with a price-earnings ratio of 43.36, a price-book ratio of 2.54 and a price-sales ratio of 1.32.
The GF Value Line suggests the stock is fairly valued currently based on its historical ratios, past financial performance and analysts’ future earnings projections.
At 72 out of 100, the GF Score indicates the company is likely to have average performance going forward. While it received high ratings for momentum and profitability, the financial strength rank is more moderate and the grades for growth and value are low.
With a 0.69% stake, Jim Simons (Trades, Portfolio)’ Renaissance Technologies is BGC’s largest guru shareholder. Soros, Ray Dalio (Trades, Portfolio)’s Bridgewater Associates, Murray Stahl (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio) and Barrow, Hanley, Mewhinney & Strauss also own the stock.
Transocean
The firm entered an 855,992-share holding of Transocean (RIG, Financial), giving it 2.13% space in the equity portfolio. During the quarter, the stock traded for an average per-share price of $6.18.
The Swiss offshore drilling services provider has a market cap of $6.50 billion; its shares were trading around $8.48 on Wednesday with a price-book ratio of 0.60 and a price-sales ratio of 2.31.
According to the GF Value Line, the stock is significantly overvalued currently.
The GF Score of 53, however, means the company has poor performance potential on the back of moderate profitability, financial strength and momentum ratings as well as low growth and value ranks.
PRIMECAP Management (Trades, Portfolio) is Transocean’s largest guru shareholder with a 6.04% stake. Other top guru investors include Simons’ firm, Barrow, Hanley, Mewhinney & Strauss, Azvalor Internacional FI (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Lee Ainslie (Trades, Portfolio).
Alerian MLP
With an impact of -1.77% on the equity portfolio, Muhlenkamp’s firm trimmed its holding of the Alerian MLP ETF (AMLP, Financial) by 38.61%, or 109,762 shares. The stock traded for an average price of $38.39 per share during the quarter.
It now holds 174,555 shares in total, which occupy 2.43% of the equity portfolio. GuruFocus estimates the firm has gained 8.35% on the investment.
The ETF, which tracks the performance of the Alerian MLP Infrastructure Index, was trading around $40.72 on Wednesday.
The stock has climbed around 13.36% year to date.
The 14-day relative strength index of 64.73 indicates the ETF is neither overbought nor oversold.
Holding 0.12% of its outstanding shares, David Tepper (Trades, Portfolio) has the largest position in the ETF. It is also being held by Stahl, Simons’ firm, Gabelli, Caxton Associates (Trades, Portfolio) and Jefferies Group (Trades, Portfolio).
ProShares Short QQQ -1x Shares
The firm dumped all 904,875 shares of the ProShares Short QQQ -1x Shares (PSQ, Financial) ETF, impacting the equity portfolio by 5.64%. The stock traded for an average price of $11.57 per share during the quarter.
GuruFocus data shows the firm lost around 18.86% on the short-lived investment.
The ETF, which seeks daily investment results, before fees and expenses, which correspond to the inverse of the performance of the Nasdaq 100 Index, was trading around $10.11 on Wednesday.
The stock has fallen about 30.32% year to date.
The 14-day relative strength index of 26.37 indicates the ETF is oversold.
No gurus are currently invested in the ETF.
Additional trades and portfolio performance
During the quarter, Muhlenkamp’s firm sold out of Cameco Corp. (CCJ, Financial), established positions in PulteGroup Inc. (PHM, Financial), Taylor Morrison Home Corp. (TMHC, Financial) and Tegna Inc. (TGNA, Financial) and boosted its holdings of a number of stocks, including NHI Holdings Inc. (NMIH, Financial).
Slightly over half of the firm’s $282 million equity portfolio, which is composed of 31 stocks, is invested in the energy, technology and health care sectors.
According to the firm’s website, the Muhlenkamp Fund returned 2.88% in 2022, outperforming the S&P 500’s -18.11% return.
