Tutor Perini Corp (TPC: $23/share) – Closing Short Position – down 20% vs. S&P up 17%
Tutor Perini was originally selected as a Danger Zone pick on 12/12/16. At the time of the report, the stock received a Very Unattractive rating. Our short thesis highlighted declining economic earnings, questionable shareholder value destroying acquisitions, a misaligned executive compensation plan, and low margins in a competitive industry.
During the 479-day holding period, TPC outperformed a short position, falling 20% compared to a 17% gain for the S&P 500. TPC was upgraded to Neutral on 3/15/18 as the stock price decline decreased the downside risk. While TPC’s fundamentals remain weak (bottom-quintile ROIC and negative economic earnings), the growth expectations implied by its valuation have become less unrealistic, especially factoring in the lower tax rate going forward. As a result, we are closing this position.
We hope investors were able to avoid a portfolio blowup or participate in the 20% fall in the stock price.
Figure 1: TPC vs. S&P 500 – Price Return: Successful Short Call
Sources: New Constructs, LLC and company filings
Note: Gain/Decline performance analysis excludes transaction costs and dividends.
This article originally published on April 5, 2018.
Disclosure: David Trainer, Kyle Guske II, and Sam McBride receive no compensation to write about any specific stock, style, or theme.
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