On December 31, 2024, Donald Smith & Co executed a strategic reduction in its holdings of Cool Co Ltd (CLCO, Financial), a Bermuda-based LNG shipping company. The firm decreased its position by 22,117 shares at a transaction price of $7.95 per share. This move resulted in a total holding of 3,440,652 shares, representing 6.40% of Cool Co Ltd's total shares. The transaction reflects a slight adjustment in the firm's portfolio, where Cool Co Ltd now accounts for 0.65% of its total investments.

Donald Smith & Co: A Deep-Value Investment Firm

Founded by Donald G. Smith in 1980, Donald Smith & Co is renowned for its deep-value investment strategy, focusing on undervalued stocks with potential for earnings growth. The firm employs a bottom-up approach, targeting companies trading at discounts to tangible book value. Notable holdings include AerCap Holdings NV (AER, Financial), Eldorado Gold Corp (EGO, Financial), Genworth Financial Inc (GNW, Financial), Unum Group (UNM, Financial), and Civitas Resources Inc (CIVI, Financial). With a total equity of $4.18 billion, the firm has a strong presence in the financial services and basic materials sectors.

Cool Co Ltd: An Overview

Cool Co Ltd, established in Bermuda, specializes in the acquisition, ownership, and operation of liquefied natural gas (LNG) carriers. The company also manages third-party fleets under charter agreements. With a market capitalization of $418.073 million, Cool Co Ltd's stock is currently priced at $7.72, reflecting a year-to-date decline of 7.54%. The company's GF-Score is 24/100, indicating potential challenges in future performance.

Impact of the Transaction

The reduction in shares by Donald Smith & Co has had a noticeable impact on Cool Co Ltd's stock, which has decreased by 2.89% since the transaction. The adjustment in holdings suggests a reassessment of the company's prospects, possibly due to the challenges faced in the LNG shipping sector. Despite the reduction, Cool Co Ltd remains a significant part of the firm's portfolio, highlighting its continued interest in the company's potential.

Financial Metrics and Valuation

Cool Co Ltd's financial metrics present a mixed picture. The company's price-to-earnings ratio stands at 4.47, suggesting potential undervaluation. However, the balance sheet and profitability ranks are both at 4/10, indicating moderate financial health. The interest coverage ratio is 2.30, reflecting the company's ability to meet its interest obligations, albeit with limited margin.

Industry and Market Context

Operating within the oil and gas industry, Cool Co Ltd faces significant challenges in the LNG shipping sector, impacting growth and profitability. The market sentiment is currently negative, with a 14-day RSI of 35.89, indicating potential oversold conditions. The company's Altman Z score of 0.52 suggests financial distress, necessitating careful consideration by investors.

Conclusion and Implications for Investors

The decision by Donald Smith & Co to reduce its stake in Cool Co Ltd may reflect a strategic reassessment of the company's future prospects. Investors should carefully evaluate Cool Co Ltd's financial metrics and industry challenges before making investment decisions. This transaction underscores the importance of monitoring guru activities for potential market signals, as they can provide valuable insights into broader market trends and individual stock performance.

This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.