Undervalued stocks investor,
III of Pennsylvania-based Schneider Capital Management, has
recently reported 63 transactions in his third quarter portfolio
update. The transactions consisted of the following:
Additions to Current Shares
Reductions to Current Shares
With more than 124 stocks in his portfolio, and a
quarter-over-quarter turnover rate of 10 percent, Schneider
Capital manages about $1.7 billion in assets as of Sept. 30,
according to its website.
With the majority large cap stocks, Shneider Capital targets
undervalued securities that have a market cap of $1 billion or
greater, with potential for positive change.
In the funds' third quarter investment review, the firm provided
detailed analyses of several of its holdings, including the bank,
homebuilder, coal, oil and gas and technology sectors.
Below are three stock reductions in the third quarter that made
the most impact to Schneider's portfolio.
KB Home (
Schneider reduced his holding of homebuilding company, KB Home (
) by 59.22 percent, which created the most impact out of his
portfolio. In Schneider's third quarter investment review, the
firm shared the following sentiment about its homebuilding
"We believe public homebuilders are in the early phase of a
durable recovery. Housing fundamentals continued to improve
during the quarter. Strong sales figures and low and declining
inventory levels indicate solid progress on the residential real
estate front. Existing home inventory is down to a more normal
six months. Nationally, housing prices are rising slightly for
the first time in six years, which is a positive factor for land
values and homebuilder profitability. The stocks have had a good
run since last fall, but they continue to offer significant
With a market cap of $1.21 billion, KB Home is currently trading
at $14.58 per share, a value reflective of the recovery that
Schneider spoke of as its price continues to rise in a one-year
time frame. Its share price is relatively lower than its
homebuilder stock counterparts such as Lennar Corp. (
), Caltex Australia Ltd. (
) and MDC Holdings Inc. (
Data in its 10-Year Financials shows KB Home's declining revenue
at a negative rate of 11.9 percent in the past 10 years, as well
as a dividend yield close to its five-year low and its price
ratios trading at their three-year highs.
Ranking low in Business Predictability, KB Home maintains a
Financial Strength rank of 6 out of 10 and a Profitability &
Growth rank of 5 out of 10 on GuruFocus
Schneider shared his outlook for its homebuilding holdings for
2013 in its third quarter investment review:
"We expect that U.S. economic growth next year will be
supported by a sustained rebound in housing. Housing fundamentals
showed solid improvement year-to-date, and the pieces for a more
sustainable recovery are now falling into place. Housing is no
longer a drag as residential investment has now contributed
modestly to U.S. economic output for the past five quarters. A
continued upward trend of rising home prices should bolster the
net worth of homeowners, reduce the likelihood of defaults, and
improve overall consumer confidence and spending trends. "
RenaissanceRe Holdings Ltd. (
Schneider reduced its RenaissanceRe Holdings Ltd. (
) shares by 74.6 percent in the third quarter, selling about
144,000 shares at an average price of $75.72.
This transaction brings Schneider's holding down to a total of a
little over 49,000 shares from the 193,000 shares it reported in
the second quarter of this year.
RenaissanceRe is a global provider of property catastrophe and
specialty reinsurance, as well as other insurance coverages,
according to its website.
With a market cap of $3.97 billion, RenaissanceRe belongs in the
financial services sector, which accounts for the largest sector
represented in Schneider's portfolio at 41.3 percent, on top of
consumer goods at 17.1 percent and basic materials at 10.5
percent, according to its current portfolio statistics.
The firm's mention of the financial sector in its third quarter
investment review mostly targeted banks, stating:
"Bank fundamentals continue to strengthen, and our regional
and money center bank holdings remain undervalued. Earnings from
improved credit quality continue to boost already-high capital
levels, and our banks continue to control expenses and take
actions to efficiently grow loan balances and revenues. Banks
have the potential to generate enormous amounts of excess capital
in coming years that should enable them to increase dividend
payments and repurchase a significant percentage of their share
Reflectively, RenaissanceRe shows a positive trend line in its
revenue per share data on GuruFocus 10-Year Financials; its
revenue growth rate in the past 10 years is 8.3 percent.
It upholds a 1-star Business Predictability rank, and both its
Financial Strength and Profitability and Growth ranks are 6 out
of 10; it is currently trading close to its 10-year high at
$79.41 per share.
While its only Good Sign reveals a P/E ratio close to a 10-year
low, its four Severe Warning signs highlight its declining per
share revenue and gross margin, as well as its divergent cash
flow and accumulation of sales outstanding.
Besides Schneider, other Guru investors who reduced their shares
of RenaissanceRe include Richard Pzena and Jim Simons in the
third quarter, as well as Chase Coleman, RS Investment Mangement
and Steven Cohen in the second quarter.
To view RenaissanceRe's holding history with other Gurus, visit
RNR: Holding History.
Consol Energy Inc. (
Schneider reduced his share of Pittsburgh-based coal and natural
gas producer, Consol Energy Inc. (
), by 67.45 percent in the third quarter. The transaction totaled
about 264,000 shares sold at an average price of $30.76.
This places Schneider at a current holding of almost 130,000
shares of Consol Energy, compared to its 382,000 shares reported
in the second quarter of this year.
Schneider's comment in its third quarter investment review about
coal and natural gas producers stateing:
"Our conviction level remains high for a turnaround in the
fortunes of U.S. thermal coal producers. Production levels have
declined this year in response to the temporary weakness in
demand. Higher seasonal demand during the summer combined with
these production cuts have begun to bring bloated thermal coal
inventories back in the right direction. The rebalancing of
domestic supply and demand, combined with healthy long-term
growth in global coal demand as the lowest cost electricity
source, should provide support for higher coal prices. Our
holdings, which are focused on thermal coal producers in the
Powder River Basin, occupy the lower range of the production cost
curve. These firms should have tremendous earnings leverage when
thermal coal prices recover and production rebounds from
A higher natural gas price is the most direct path to an
uptrend in coal earnings, and we are encouraged that the gas rig
count has fallen by more than one-half since last fall. Spot gas
prices have rebounded strongly from the April 2012 low and are at
a level that ends the painful Powder River Basin coal-to-gas
switching trend that began last winter."
Consol Energy is currently trading at $32.85 per share, with a
market cap of $7.5 billion, a P/E (ttm) ratio close to a
three-year low of 17.3, a P/B ratio of 2 and a P/S ratio of 1.2.
While its revenue has been on an upward trend in the last five
years, one Warning Sign indicates that its revenue per share has
been in decline for the past 12 months.
Consol Energy has a business predictability rank of 2.5 out of 5
stars on GuruFocus, as well as Financial Strength rank of 5 out
of 10 and a Profitability and Growth rank of 9 out of 10.
Besides Schneider, other Gurus that have either reduced or sold
out of its shares as of the second quarter include Mason Hawkins,
Steven Cohen and Ronald Muhlenkamp.
To view its holding history with other Gurus, visit CNX: Holding
View the rest of Arnold Schneider's portfolio here.
Also view a list of his top growth stocks, undervalued stocks and
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