The biggest position in Gates Capital Management’s concentrated portfolio at the end of December 2018 was in DaVita Inc (NYSE:DVA) and it was valued $114.56 million, on the account of 2.23 million shares outstanding. DaVita Inc, previously known under the name DaVita Healthcare Partners, Inc is a medical care company that provides kidney dialysis services to people who have chronic kidney failure. Its headquarters are in Denver, Colorado, and the company has been operating for 25 years. DaVita has a market cap of $9.23 billion, and it is trading at a price-to-earnings ratio of 69.74. Over the past 12 months, the company’s stock lost 20.97%, and on March 4th it had a closing price of $55.44. In November last year, the company was in the news having made a settlement with the families whose relatives had cardiac arrest and died very soon after they had received dialysis treatments provided by DaVita. The families filed a lawsuit, and according to the settlement, the company had to pay $25.5 million to the families, as they have won a $383.5 million jury verdict.
For the three months ended December 2018, the company reported consolidated revenues of $2,821 million, compared to revenues of $2,847 million in the fourth quarter of 2017. It also disclosed adjusted net income from continuing operations of $149 million and adjusted earnings per share of $0.90 compared to net income of $170 million and adjusted EPS of $0.92 in the same quarter of 2017. Its net loss for Q4 2018 was of $150 million or $0.90 per share, compared to a net income of $303 million or $1.64 per share in Q4 of 2017. Recently, SunTrustBanks restated its ‘Hold’ rating on the company, while Robert W.Baird lowered its price target to $70.00 from $90.00 with ‘Outperform’ rating on it.
Gates Capital Management had the second biggest position at the end of December 2018 in Hilton Hotels Corporation Common Stock (NYSE:HLT). Its stake in the company counted 1.57 million shares, which were worth $112.61 million, accounting for 6.2% of the fund’s portfolio. It also held a large stake in Gaming and Leisure Properties Inc (NASDAQ:GLPI), which included 3.29 million shares, with a value of $106.38 million, amassing 5.86% of its equity portfolio.
The only new long position Gates Capital Management initiated during the fourth quarter of 2018 was the one in Fortive Corp (NYSE:FTV), a diversified conglomerate company, which was spun off from Danaher and after which it became one of the S&P 500. The fund purchased 795,690 Fortive’s shares, which carried a value of $53.84 million, establishing a position that accounted for 2.96% of its portfolio. Year-to-date, the company’s stock gained 22.61%, and on March 4th it had a closing price of $82.58. Fortive Corp has a market cap of $27.58 billion, and it is trading at a price-to-earnings ratio of 9.83. In its last financial report for the fourth quarter of 2018, the company disclosed net earnings from continuing operations attributable to common stockholders of $222.8 million, and net earnings per share from continuing operations of $0.66 compared to net EPS of $0.84 for the corresponding quarter of 2017. Fortive also reported that revenues (for Q4 2018) from continuing operations have increased by 11.4% on a year-to-year basis to $1.8 billion. On February 12th, William Blair restated its ‘Market Perform’ rating on the stock, and earlier (at the beginning of the year) Credit Suisse Group repeated its ‘Neutral’ rating with a price target of $78.00.
During the fourth quarter of 2018, Gates Capital Management lost faith in 9 companies and decided to sell out its positions in them. The biggest stake the fund dumped was the one in Caesars Entertainment Corporation Common Stock (NASDAQ:CZR), and it counted 6.71 million shares with a value of $68.79 million. Among other large stakes the fund said goodbye to in the last quarter of 2018, were those in Wyndham Destinations Inc (NYSE:WYND), which included 1.41 million shares that were worth $61.09 million, and Ingersoll-Rand PLC (NYSE:IR), whose 535,167 shares, with a value of $54.75 million the fund sold out.
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This article was originally published at Insider Monkey.
