Alan Fournier’s Top 5 Trades of the 3rd Quarter

Alan Fournier (Trades, Portfolio), leader of Pennant Capital Management, disclosed this week that his firm’s top five trades during the third quarter included increased bets in the SPDR Gold Trust (GLD) exchange-traded fund and Walt Disney Co. (NYSE:DIS), new positions in Comcast Corp. (CMSCA) and General Motors Co. (NYSE:GM) and the closure of its Johnson & Johnson (NYSE:JNJ) position.

Prior to founding Pennant Capital, Fournier managed global equity investments at David Tepper (Trades, Portfolio)’s Appaloosa Management. Fournier started the Summit, New Jersey-based firm in 2001 with $12 million from Tepper and converted the firm into a family office in 2019 after several years of unsatisfactory returns.

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As of third quarter-end, Pennant Capital’s $275 million equity portfolio contains 20 stocks, with four new holdings and a turnover ratio of 25{46dd52bca0123ad67b2d1222819e83fd0a56e45ca5068239f05f0c514f1e20f9}. The top three sectors in terms of weight are communication services, consumer cyclical and technology, representing 44.07{46dd52bca0123ad67b2d1222819e83fd0a56e45ca5068239f05f0c514f1e20f9}, 12.55{46dd52bca0123ad67b2d1222819e83fd0a56e45ca5068239f05f0c514f1e20f9} and 9.87{46dd52bca0123ad67b2d1222819e83fd0a56e45ca5068239f05f0c514f1e20f9} of the equity portfolio.

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SPDR Gold Trust

Pennant Capital purchased 113,000 shares of SPDR Gold Trust, increasing the position 89.68{46dd52bca0123ad67b2d1222819e83fd0a56e45ca5068239f05f0c514f1e20f9} and the equity portfolio 7.27{46dd52bca0123ad67b2d1222819e83fd0a56e45ca5068239f05f0c514f1e20f9}. Shares averaged $179.71 during the third quarter.

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According to the State Street Global Advisors website, the SPDR Gold Trust seeks to track the performance of gold bullion less the trust’s expenses.

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Gurus with large holdings in SPDR Gold Trust include Ray Dalio (Trades, Portfolio)’s Bridgewater Associates, First Eagle Investment (Trades, Portfolio), Caxton Associates (Trades, Portfolio) and John Paulson (Trades, Portfolio)’s Paulson & Co.

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Walt Disney

Pennant Capital purchased 72,600 shares of Walt Disney, increasing the position 76.91{46dd52bca0123ad67b2d1222819e83fd0a56e45ca5068239f05f0c514f1e20f9} and the equity portfolio 3.27{46dd52bca0123ad67b2d1222819e83fd0a56e45ca5068239f05f0c514f1e20f9}. Shares averaged $124.91 during the third quarter.

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GuruFocus ranks the Burbank, California-based entertainment giant’s profitability 8 out of 10 on the back of a 4.5-star business predictability rank even though revenues have declined over the trailing 12 months and returns are underperforming more than half of global competitors.

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Disney’s revenue declined 6{46dd52bca0123ad67b2d1222819e83fd0a56e45ca5068239f05f0c514f1e20f9} during the 12 months ending Oct. 3, driven primarily by the closure of parks and resorts and the suspension of Disney Cruise Line sailings due to the coronavirus pandemic.

Comcast

Pennant Capital purchased 265,000 shares of Comcast, giving the holding 4.45{46dd52bca0123ad67b2d1222819e83fd0a56e45ca5068239f05f0c514f1e20f9} weight in the equity portfolio. Shares averaged $43.43 during the third quarter; the stock is modestly overvalued based on a price-to-GF Value ratio of 1.15.

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GuruFocus ranks the Philadelphia-based media company’s profitability 8 out of 10 on the back of profit margins outperforming over 85{46dd52bca0123ad67b2d1222819e83fd0a56e45ca5068239f05f0c514f1e20f9} of global competitors despite trending near 10-year lows.

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General Motors

Pennant Capital purchased 263,000 shares of General Motors, giving the position 2.83{46dd52bca0123ad67b2d1222819e83fd0a56e45ca5068239f05f0c514f1e20f9} weight in the equity portfolio. Shares averaged $28.08 during the third quarter.

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GuruFocus ranks the Detroit-based automaker’s profitability 6 out of 10 on the back of a net profit margin that outperforms over 63{46dd52bca0123ad67b2d1222819e83fd0a56e45ca5068239f05f0c514f1e20f9} of global competitors despite operating margins underperforming more than half of global vehicle and parts companies.

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Johnson & Johnson

Pennant Capital sold 65,000 shares of Johnson & Johnson, trimming the equity portfolio 3.86{46dd52bca0123ad67b2d1222819e83fd0a56e45ca5068239f05f0c514f1e20f9}. Shares averaged $147.87 during the third quarter.

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GuruFocus ranks the New Brunswick, New Jersey-based drug manufacturer’s profitability 8 out of 10 on several positive investing signs, which include a 3.5-star business predictability rank and an operating margin that is outperforming over 88{46dd52bca0123ad67b2d1222819e83fd0a56e45ca5068239f05f0c514f1e20f9} of global competitors.

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Disclosure: No positions.

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James Li

I am an editorial researcher at GuruFocus. I have a Master’s in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

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