Has famed value investor 76-year-old Jean Marie Eveillard missed the mark with ill-timed jumps and a lamentable retreat? When taking a glimpse at recently-released 13F forms filed with the SEC, the man who has served as a portfolio manager for over a quarter century guided First Eagle Global Fund to bolster holdings in Valeant Pharmaceuticals Intl Inc (NYSE:VRX) and GoPro Inc (NASDAQ:GPRO) while pulling significantly back in Apple Inc. (NASDAQ:AAPL).
Eveillard made his fortune from shrewd turns in value investing with an eye for balance sheets and assets of a company prized over long-term growth irons in the fire. The French international investor learned the tools of his trade at the distinguished Hautes Etudes Commerciales de Paris before joining the investment bank Soceite Generale in 1962. Ignoring his mentors’ advice to spring for the growth stocks, the now senior investment advisor to First Eagle Global Fund leapt towards value investing instead, inspired by the words of Benjamin Graham’s The Intelligent Investor.
“There are so few true value investors,” Eveillard has said, believing “too much career risk” scares off the rest of the financiers. Moreover, the hedge fund master acknowledges, “If one is wrong in judging a company to have a sustainable competitive advantage, the investment results can be disastrous.” Now managing a hedge fund for Fist Eagle with a portfolio valued at over $39 billion, how did this mentality unravel for the investor in the fourth quarter? Let’s take a closer look at how his moves have played out:
Valeant Pharmaceuticals Intl Inc
In the fourth quarter, Eveillard boosted his holdings in the biotech giant up 61%, with First Eagle now holding 613,800 Valeant shares worth $8.91 million. However, since the last SEC filing, the shares have lost one quarter of their value. Following Bill Ackman’s Pershing Square pulling the final curtain call on Valeant, abdicating all remaining shares, the stock has since found itself sinking to a record drop in seven years already fraught with plenty of volatility.
For Eveillard, who values assets over growth prospects, perhaps he recognizes a rare buying opportunity in the troubled biotech giant. Yet, in reaction to Ackman’s grand exit, analyst Gary Nachman of BMO Capital reiterates a Hold on VRX while cutting his price target from $19 to $15, which represents a roughly 34% increase from where the stock is currently trading.
“Pershing announced it sold its entire stake in VRX, mainly attributed to a disproportionately large amount of time and resources required to manage the investment and a decision to realize a large tax loss and dedicate more time to the rest of the portfolio. Considering all of Pershing’s efforts to create a turnaround situation with the new management team, we believe this ‘throwing in the towel’ at these levels sends a poor signal regarding the road ahead for VRX,” Nachman asserts.
Was this the exact wrong time for Eveillard to up his holdings in Valeant? Time will tell if Valeant’s assets will ultimately save the day, making the French investor’s decision to buy, buy, buy as others run for the hills a clever maneuver, or if Ackman is the wiser of the gurus.
TipRanks analytics exhibit Valeant as a Hold. Out of 15 analysts polled by TipRanks in the last 3 months, 3 are bullish on Valeant stock, 9 remain sidelined, and 3 are bearish on the stock. With a return potential of nearly 40%, the stock’s consensus target price stands at $15.36.
First Eagle also is bullish on GoPro, having increased nearly 11% of its holdings in the action camera giant, now standing at 542,200 GoPro shares worth $4.72 million. Has this been a solid boost on Eveillard’s part?
Though as of the last SEC filing, the shares have lost close to 17% of their value, GoPro shares are rising 11% today after the action camera giant announced its intent to scratch 270 jobs along with the new rumble that first-quarter earnings will top the high range of guidance, circling $210 million. Additionally, the GPRO team intends to reign in operating expenses by over $200 million, which would direct EBITDA back on the profitability track this year.
CEO Nick Woodman has made clear his determination to get GoPro’s financial performance up to his high standards for the brand, believing it crucial that “expense reductions preserve [his] product roadmap.”
GoPro’s prior guidance expectations projected revenue between $190 million and $210 million as well as operating expenses between $168 million and $178 million (GAAP) for the first quarter of 2017. In GPRO’s fourth quarter, the giant saw $116 million of a net loss coupled with $541 million in revenue.
Should Woodman’s goals live up to expectation, the raise in shares could turn out to be a positive move for Eveillard and First Eagle.
TipRanks analytics demonstrate GoPro as a Sell. Based on 11 analysts polled by TipRanks in the last 3 months, 5 rate a Buy on GPRO stock while 6 maintain a Hold. The 12-month average price target stands at $7.94, marking an 8% upside from where the stock is currently trading.
Conversely, First Eagle is not confident on Apple, with Eveillard having cut back close to 47% of his holdings in the tech giant. Presently, First Eagle now holds 8,606 shares worth $996.75 K. Yet, this may have been an unwise discard for the French investor, considering that since the last SEC filing, the shares have gained almost 21% of their value.
Narrowing in on Services as a likely catalyst to bolster the tech giant’s valuation, RBC Capital analyst Amit Daryanani operates on the flip side of the coin, reiterating an Outperform rating on shares of AAPL while lifting the price target from $140 to $155, which represents a 10% increase from where the stock is currently trading.
Daryanani believes if Apple succeeds in its objective to double services throughout the next four years, the giant would see annual revenue riding $48 billion to $50 billion, rendering Eveillard’s decision to cut loose a big bulk of his Apple shares might prove to be a grave error in the larger scheme.
TipRanks analytics show AAPL as a Buy. Out of 36 analysts polled by TipRanks in the last 3 months, 28 are bullish on Apple stock, 6 remain sidelined, and 2 are bearish on the stock. With a return potential of nearly 6%, the stock’s consensus target price stands at $148.25.