On March 13, 2013, Guru
of Perry Capital bought 6,500,000 shares of a new holding,
CommonWealth REIT (
), at the current price $22.01, with a change from average up 1%.
CommonWealth REIT is an office and industrial real estate
investment trust that invests in commercial office buildings
located in major metropolitan areas throughout the U.S. and in
According to Bloomberg today, the company is up against a
campaign by its largest shareholders, Corvex Management LP and
The Related Companies LP, to remove the board of directors.
Corvex Management and Related Companies own around a 10% stake in
CommonWealth REIT, and are interested in acquiring the real
estate investment trust. Perry's recent 13D filing says that
Perry supports efforts to improve the company's corporate
GuruFocus did a financial and performance checkup on CWH and
found that CommonWealth REIT displays poor financial strength,
usually caused by too much debt. The company has an Altman
Z-score of 0.75, meaning the distress zone. This usually implies
the possibility of bankruptcy in the next two years. CWH also has
a low Piotroski F-Score of 3, which usually implies poor business
operation. Additionally, CommonWealth REIT revenue has been in
decline for the last five years. The company's operating margin
has been in a 5-year decline, with an average rate of decline per
year at 8.1%. Furthermore, CommonWealth REIT has issued new debt
of $632.019 million over the past three years. Ben Graham prefers
that companies' interest coverage is at least five; CommonWealth
REIT's interest coverage is low at 1.4. The dividend payout of
CommonWealth REIT is 2.38, which seems too high. (If a company's
dividend payout ratio is too high, its dividend may not be
Other warnings are: CWH stock dividend yield (6.55%) is close to
a 5-year low of 5.9%, and its P/S Ratio (1.8932) is close to
one-year high of 1.97. CommonWealth REIT had an operating loss
over the past three years.
CommonWealth REIT (
) has a market cap of $1.9 billion, and a P/B ratio of 0.62.
CommonWealth REIT's 10-year financials are here.
As of Dec. 31, 2012, Perry Capital has a portfolio of 24 stocks
with a total value of $2.7 billion and a quarter-over-quarter
turnover of 21%. Top industry sectors in the portfolio are
energy, 28.4%, financial services, 21.2%, and consumer cyclical,
13%. Guru Perry has been called a hedge fund superstar.
See Richard Perry's portfolio here.
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