David Rolfe

David Rolfe

Last Update: 05-15-2015

Number of Stocks: 22
Number of New Stocks: 0

Total Value: $7,452 Mil
Q/Q Turnover: 5%

Countries: USA
Details: Top Buys | Top Sales | Top Holdings  Embed:

David Rolfe Watch

  • Coach: Don’t Beat A Dead Horse

    If you bought Coach (NYSE:COH) stock July 25, 2005, you paid $36 at the open and $34.94 at the close. Today, the stock sits under $31 and while they have paid out $4.71 in dividends, after taxes, you are flat and your money is kicking you for it.

    Despite growing its revenue by 181% from $1.7 billion to $4.3 billion, accumulating over $7.4 billion in net income, more than tripling its book value, and buying back over 25% of the outstanding stock, the market value has gone exactly nowhere.


  • Qualcomm: A David Rolfe Bargain Stock 

    David Rolfe (Trades, Portfolio) is the CIO of Wedgewood Parnters, a St. Louis based mutual fund management firm founded in 1988. The great thing about Rolfe is that he limits the holdings to about 20 investments, which is abnormal for a mutual fund. And, given that his fund has outpaced the S&P over the last 3, 5, 10, 15, and 20 year periods, this approach has withstood the test of time. Too bad more mutual funds don’t follow this approach.

    You can learn more about David in this Barron’s article.

  • Wedgewood Partners 2nd Quarter 2015 Client Letter - Wedgewood On Sale

    Wedgewood Partners 2nd Quarter 2015 Client Letter

    Wedgewood On Sale


  • What It Means To Be A Focused Value Investor - David Rolfe Of Wedgewood Partners

    You don't need to have a high IQ in order to be a successful value investor.

    That is the message that we have often heard from Warren Buffett (Trades, Portfolio), but you have to admit that it is easy for him to say given that he is a genius.


  • David Rolfe Adds to Most Valuable Stakes in His Portfolio

    In his role as manager of Wedgewood Partners’ portfolio, David Rolfe (Trades, Portfolio)’s investment philosophy has been centered around the belief that significant wealth can be created by investing as “owners” of companies.

    Rolfe bought no new stocks in the first quarter, but he did add to several existing holdings, including the four most valuable stakes in his portfolio, reaffirming his “ownership” of each.  

  • 20 Questions With David Rolfe - Part II

    Read Part I of GuruFocus' interview with David Rolfe here.

    10. So basically you have a shortlist and the way you get this is, as I understand, is doing research on your clients’ requirements, even to get into the list?


  • 20 Questions With David Rolfe Part I

    Founder and CEO of GuruFocus, Charlie Tian, had the pleasure of interviewing David Rolfe (Trades, Portfolio) at this year’s Berkshire Hathaway (BRK.A)(NYSE:BRK.B) shareholder meeting at Omaha. Rolfe discussed his current holdings, his most heavily weighted positions and even gave advice to young investors or those who are thinking about becoming investors but have not yet taken the leap.

    Rolfe is the CIO of Wedgewood Partners,, Inc. The top three sectors in his portfolio are technology (28.5%), financial services (17.2%) and healthcare (14.6%). His top three most heavily weighted stocks are: Qualcomm Inc (NASDAQ:QCOM), Berkshire Hathaway Inc (NYSE:BRK.B) and Express Scripts Holdings Co (NASDAQ:ESRX).


  • David Rolfe Comments on Core Laboratories NV

    Core Laboratories (CLB) has carved out a dominant and exceptionally profitable niche in the oil service industry. The Company has a singular focus on obtaining, analyzing and rendering proprietary datasets related to the quality, efficiency and efficacy of a client’s oilfield production and development activities. In addition, the Company utilizes these data sets (and experience) to develop highly differentiated tools and equipment that are particularly useful during the development and production stages of an oilfield.

    In essence, Core Labs is “Big Data,” but considering that Core Labs was founded in the 1930’s, they were into “Big Data” well before the term started showing meaningful interest on Google Trends.


  • First Eagle is Long in National Oilwell

    In this article, let's take a look at National Oilwell Varco, Inc. (NYSE:NOV), a $20.36 billion market cap company, which is a company that designs and manufactures drill rig equipment, provides down hole tools and services, and also provides supply chain integration services to the upstream oil and gas industry.

    Largest Shareholder


  • David Rolfe On When to Trim Berkshire Hathaway Position

    Why would you trim your stake in Berkshire Hathaway (NYSE:BRK.A) (BRK.B)?

    Valuation, says David Rolfe (Trades, Portfolio) of Wedgewood Partners. Rolfe expects to own Berkshire for many years to come, but when the price to book value of Berkshire gets closer to 2, that position size should be reduced.


  • Rolfe Adds One Company to Portfolio in Fourth Quarter

    Guru David Rolfe (Trades, Portfolio), CFA and chief investment officer of Wedgewood Partners, has a small portfolio compared to many gurus, but he adheres to Westwood’s investment philosophy – significant long-term wealth can be created by investing as "owners" in companies.

    In the fourth quarter, Rolfe invested in only one company that is new to his portfolio – Core Laboratories NV (NYSE:CLB) – but he made three separate purchases in it.


  • Wedgewood Partners Q4 2014 Client Letter - '2015 - Groundhog Day or Wizard of Oz?'

    Review and Outlook

    Our Composite (net-­‐of-­‐fees) gained +5.21% during the fourth quarter of 2014. This gain is in line with both the gains in the Standard & Poor’s 500 Index of +4.93% and the gain of +4.78% in the Russell 1000 Growth Index. The fourth quarter was the eighth quarter in a row of positive gains in the S&P 500 Index, and 9 out of the past 10. The last negative quarter in the stock market was back in the fourth quarter of 2012. That decline was just -­‐.38%. The S&P 500 Index did decline during the second quarter in 2012, but only a piddling decline of -­‐2.75%. The last meaningful quarterly decline in the stock market was registered in the third quarter of 2011 when the S&P 500 Index fell nearly -­‐14%. Said another way, the U.S. stock market has been straight up for 13 quarters – a streak nearly unmatched in the annals of stock market history. In addition, as if the tripling in the S&P 500 Index during the Great Bull Market was not enough for investors, the gain in average (or “median”) stock (Value Line Arithmetic Index) has been more than +75% greater than the capitalization-­‐weighted S&P 500 – or nearly five-­‐fold over the course of the Great Bull Market. (See chart of P/CF of median stock on top of page 10.) Lastly, as this Letter is being written, Mr. Market has awoken from his 2014-­‐volatility slumber. According to Investech, there were only 32 days in 2014 with daily moves of 1% -­‐ and only a single trading with a 2% move. As sober reminder, 2008 had 72 2% days and 2009 had 45.


  • Another Guru Goes for Oil - David Rolfe Buys Core Labs

    David Rolfe (Trades, Portfolio) is the latest guru to dip his toe in oil as more value-conscious investors eye the commodity’s 45% price slump from June peaks. Rolfe picked up shares of Core Laboratories NV (NYSE:CLB), a global reservoir optimization technology company that enables its clients to extract more oil and gas from wells.

    Rolfe acquired 2,226,741 shares of the company reported Dec. 18 by GuruFocus Real Time Picks. His holding represents about 5% of the company. Core Laboratories shares traded around $121.68 per share on Friday, after a 36% decline year to date.


  • Hedge Fund Managers Greenblatt and Soros Are Betting On Mead Johnson Nutrition

    In this article, let's take a look at Mead Johnson Nutrition Company (NYSE:MJN), a $18.56 billion market cap company that manufactures, distributes and sells infant formulas, children's nutrition and other nutritional products.

    Attractive markets


  • David Rolfe's Wedgewood Partners Q3 2014 Portfolio Commentary

    Review and Outlook Our Composite (net-­of-­fees) was basically flat (+0.30%) during the third quarter of 2014. This rounding-­error gain is below both the gain in the Standard & Poor’s 500 Index of +1.13% and the gain of +1.49% in the Russell 1000 Growth Index.

    Our Composite year-­to-­date gain of +3.8% has lagged substantially the gains in the Standard & Poor’s 500 Index and the Russell 1000 Growth Index of +8.3% and +7.9%, respectively. A somber fact: Over the past six months, nearly two-thirds of our current portfolio has underperformed the S&P 500 Index. In the never ending zero-­interest rate environment of Quantitative Easing the chase for return and yield continues to reward the stocks of poorer quality (i.e. low/no profits), higher debt-­ leveraged company stocks and reward company stocks that pay out higher 2 percentages of earnings in the form of dividends. Individual stock selection mistakes aside, we believe that our investment focus on higher quality growth companies at reasonable valuations is simply ill-­suited in the current ebullient environment. In fact, 2014 may well go down as one of the worst years for active equity managers in the past two decades. According to The Leuthold Group: Last year provided managers not only with huge gains but also with comparatively favorable odds of beating the S&P 500. In 2013, about 60% of the issues in the 1500 composite topped the +29.6% gain in the S&P 500. That percentage has been cut in half over the last nine months. The latest reading of 30.2% compares to those recorded in the late 1990s’ “bifurcated bull” – an excruciating time for active managers that ultimately ended badly for all.


  • Stericycle: A Triple Screener Hit

    Just a generation ago, our collective attitude to hazardous waste might have been described as lackadaisical, at best. Syringes, bio-wastes and other waste products from the health care system often went into regular waste streams with little concern.

    Since then, however, that collective attitude has turned to vigilant, even hyper-vigilance sometime. We no longer accept anything but the utmost of care when managing and disposing of those wastes. It’s been sea change, and one that’s been driven by public awareness, legislation, and litigation.


  • Quickly Gain A Wealth Of Information From The GuruFocus Summary Page (Using Apple As An Example)

    When investing in a company, it is not only necessary to know about the company itself, but also how the stock is valued. Viewing a company through its summary page at GuruFocus provides a wealth of information to help understand its financial strength, profitability, growth and valuation, and see how the gurus and insiders are trading the stock. The features of the summary page can help you decide in minutes if not seconds whether or not to further investigate the stock for an investment opportunity. The summary page at GuruFocus should be your first destination when researching a particular stock.

    Using Apple (AAPL) as an example, towards the top of the page it can be seen that Apple is a very predictable company with its Business Predictability score of 4.5/5. By moving the mouse over the “question mark” next to the rating, a popup will appear giving more information about stocks with the same rating. Stocks with a 4.5/5 rating have gained 10.6 percent on average while back-testing for the past 10 years. Only 10 percent of the stocks lost money if held for 10 years.


  • Paul Tudor Jones, John Buckingham and Jim Simons Long in Coach

    In this article, let's take a look at Coach Inc. (NYSE:COH), a $10.21 billion market cap company that designs, makes and markets fine accessories for women and men, including handbags, weekend and travel accessories, outerwear, footwear and business cases.

    Key drivers


  • Schlumberger is the Largest Oil-Service Company in the World and Fits Any Portfolio

    In this article, let's take a look at Schlumberger Limited (NYSE:SLB), a $141.86 billion market cap company, which is a leading oilfield services company providing equipment and technology to the oil and gas industry worldwide.

    A dominant firm


  • Widely Held Guru Stocks Near Historical Low P/B Ratios

    Buying stocks at historically low price-to-book (P/B) ratios has been an effective strategy. The model portfolio, “Top 25 Historical Low P/B Ratio Companies”, has outperformed the S&P 500 by 29.51 percent since its inception in 2010. The following stocks are widely held by the investing gurus we follow and are trading near their historical low P/B ratios:

    Kellogg Company (K) is trading at a low P/B ratio of 6.10, near its 10-year low of 5.88. Its principle products are ready-to-eat cereals and convenience foods, such as cookies, crackers, savory snacks, toaster pastries, cereal bars, fruit-flavored snacks, frozen waffles and veggie foods. The 5- and 10-year median P/B ratios are 8.4 and 8.5. At the 5-year median, the stock would be priced at $87.60. Book value per share has been growing at an annual rate of 11.90 percent over the past five years. The stock is held by 18 gurus we follow with Hotchkis & Wiley having the largest holding of 2.43 million shares, representing 0.68 percent of the shares outstanding.


  • David Rolfe Comments on Apple

    Apple (AAPL), circa 2012-2014, is Exhibit A on how investing with the conviction of a successful business owner is a prerequisite for repeatable investment success. Before we explain, we would like to offer up pop quiz. Quick, off the top of your head, what is the 1-year, 2-year and 3-year return (roughly) of Apple stock (and the S&P 500 too) as of the end of the second quarter? Here is a graphic hint:


  • David Rolfe Comments on Coach

    Coach (COH) shares significantly declined during the quarter and have been a relative detractor since we first began purchasing shares in July 2012. With clearer hindsight, where did we go wrong on our initial timing? Our view then was that the Company's lackluster North American sales slump was largely due to a pause in creative new product. Thus, our initial investment in these shares came far too early in the Company's efforts to reinvigorate their iconic brand.

    Of course, the journey in our ownership in Coach, thus far, has been long...and wrong. When we initiated Coach, we recognized that there was increasing competitive encroachment in the North American handbag and accessories market. However, we underestimated the aggressive expansion of Coach’s competitors, as well as the pernicious effects of brand underinvestment during the previous business cycle. The core risk of Coach has been centered on its North American business, which has been losing share over the past, roughly 3 years. Competitors Michael Kors, Kate Spade and Tory Burch have all successfully copied key aspects of the high return on capital Coach playbook, and now the original progenitor of "accessible luxury" now finds itself at the crossroads of not only redefining and rebuilding its own brand, but fighting off it's well entrenched progeny. We still think Coach has a sustainable competitive advantage, and we do not think that the competitive inroads of Coach's peer group are sustainable over the next 3 to 5 years.


  • David Rolfe's Wedgewood Partners Q2 2014 Commentary

    Review and Outlook


  • David Rolfe Comments on Mead Johnson Nutrition

    Mead Johnson Nutrition (MJN)

    Edward Mead Johnson: founder of not one, but two great companies in his lifetime. Now, how many of us can say that?! In 1885, after graduating from the University of Michigan with a degree in law, he and his two brothers, Robert Wood Johnson I and James Wood Johnson, would found Johnson & Johnson, the consumer healthcare products company in Brunswick, New Jersey. With no lack of success, Edward soon 15 decided he wanted to do more. Ten short years later, he broke off from Johnson & Johnson and founded American Ferment Company in Jersey City, N.J., making nutritional products. Fast forward another ten years, in 1905 American Ferment re-­‐ established itself as Mead Johnson and Company and the +100 year history of the Mead Johnson Nutrition Company begins. While Mead Johnson's name has remained intact throughout its history, the company – with sales then of $131 million – was acquired in 1967 by Bristol-­‐Myers for $240 million. Bristol-­‐Myers Squibb owned Mead Johnson as a wholly owned subsidiary for the next four decades until they announced in April 2008 plans to sell 10-­‐20% of Mead Johnson to the public through an IPO in order to better focus on its burgeoning biopharmaceutical business. Bristol-­‐Myers Squibb would proceed to split off Mead Johnson and by February 2009 the IPO was complete. Shortly thereafter, in November of 2009, Bristol-­‐Myers would spin out the rest of their ownership of Mead Johnson in a stock swap, valued at $7.7 billion. Mead Johnson Nutrition would operate as a fully independent public company going forward.


  • David Rolfe Comments on LKQ Corporation

    LKQ Corporation (LKQ) is the world's largest procurer and distributor of alternative and aftermarket collision replacement parts for automobiles and other vehicles. The Company has grown rapidly since its inception in 1998, by executing an expansion strategy that has included aggressive organic and inorganic investments. To date, LKQ's strategy has resulted in a business with unparalleled scale, at over $5 billion in revenues across three continents, compared with aftermarket and salvage parts competitors that routinely post less then $100 million in sales, usually with the largest footprints limited to regional geographies.

    LKQ has a very clear, defensible value proposition that we believe should continue to generate superior business results for many years to come. Consider vehicle owners and collision repair shops have three options when sourcing replacement collision parts: the original equipment manufacturer (also known as "OEMs" – think GM, Chrysler, Toyota or Honda), aftermarket manufacturers (generic car parts, similar in quality to OEM -­‐ "off-­‐brand") or alternative parts, which includes recycled, remanufactured and refurbished OEM parts (usually from the purchase and dismantling of salvage vehicles). LKQ specializes in procuring and distributing the latter two categories – alternative and aftermarket replacement collision parts – which is a $15 billion market opportunity in the U.S. These alternative parts are 13 typically 20% to 50% cheaper than OEM parts, with headlamp assemblies, hoods, as well as rear and front bumper covers rounding out some of the most popular products.


  • David Rolfe Comments on Berkshire Hathaway

    Although we view Berkshire Hathaway (BRK.A)(BRK.B) to be an exceptional growth and profitability machine, that doesn't mean Mr. Market agrees with us. In other words, despite our expectations for double-­‐digit BVPS growth and value-­‐added advantages, growth could turn out to be "not growth." Essentially, we could be wrong. While this might sound helpless, quite the contrary, we believe it is this admission of potential error that allows us to seek an effective cushion from the very risk of "not growth." If Chapter 20 of the Intelligent Investor just came to mind, then kudos to you! If not, we understand, particularly because Ben Graham's examples of a "margin of safety" are much more draconian than we use. But the concept of preserving capital by not overpaying for the future earnings stream of a business is very much the same.

    Berkshire Hathaway is a good example of how we expect long-­‐term value creation to drive excellent shareholder returns, provided that we do not overpay for such potential returns. Consider the Company's share repurchase strategy, which authorizes management to repurchase shares at prices equivalent to or less than 120% of book value. Berkshire currently has in excess of $40 billion in unencumbered cash on its balance sheet, relative to slightly more than $300 billion market capitalization, so there are substantial resources available for the Company to execute such a buyback strategy. Assuming book value growth falls short of our double-­‐digit expectations, we expect shares to simply not appreciate, rather than depreciate, as we estimate shares currently trade near 120% of book value, with buybacks effectively providing a valuation "floor." So we could be wrong about Berkshire's upside, but we think we have accounted for that risk by ensuring relatively limited downside. We conclude by reiterating that any business can sell $100 bills for $95 to generate billions of revenue. But that is not a true value proposition. We believe that profitability represents the existence of value creation and capture – the higher the sustained profitability the better. Further, as these profits are retained and successfully reinvested back into the business at continued high levels of profitability, the ensuing earnings growth is what drives long-­‐term shareholder returns. While not all businesses have such an explicit (and accretive) buyback strategy as Berkshire, it is a good example of why we look for businesses that not only have ample profitability and per-­‐share earnings growth but also trade at attractive valuations. We like the rewards of a rapidly appreciating stock just as much as any investor, but we also like to maintain those rewards by recognizing the ever-­‐present risk that we could be wrong.


  • David Rolfe Comments on Visa

    During the quarter, Visa (V) reported strong year-­‐over-­‐year growth with earnings up 14%, as the business continues to operate at a superior level – very much in-­‐line with the past several years. Visa has been a core holding for our clients since October 2008 and rarely has a year gone by without the Company and its partners having to contend with lawsuits and legislation aimed at limiting pricing power and 4 distribution. 2014 is no exception, though most of the news has been favorable, with a ruling for "no change" to Visa's exclusivity for high-­‐value signature transactions. We continue to see Visa's pricing power as being derived from VisaNet's superior value proposition relative to substitutes, particularly paper-­‐ based payments, automated clearinghouse (ACH), and more recently, "cryptocurrencies" (e.g. Bitcoin). While these emerging payment platforms, including PayPal and Square, represent very legitimate substitutes to traditional interchange, in our view they are not quite "good enough," as evidenced by merchant acceptance that is largely sequestered to small businesses. While we have been net sellers of Visa over the past 18 months, it has been solely due to valuation – our primary tool for risk management at Wedgewood. We believe Visa will continue to maintain its superior competitive positioning, as competitors find it difficult to achieve the network-­‐effect benefits that have compounded the value proposition of VisaNet, particularly as acceptance and issuance of the Visa brand continues to expand.

    From David Rolfe (Trades, Portfolio)'s Wedgewood Partners first quarter 2014 commentary.  

  • David Rolfe Comments on Stericycle

    Stericycle (SRCL) alone operates globally and generates close to $2 billion in annual revenues. Despite Stericycle's strong business performance during the recently reported quarter, the stock detracted from performance, partially driven by headlines of rumored regulatory action related to one of the Company's incinerators. We believe the issue is not meaningful to results and we would be willing to add to shares on pullbacks related to this. Stericycle's stock trades in the mid to high-­‐teens EBITDA range, but the company routinely purchases smaller competitors for just 3X-­‐6X EBITDA. This accretion is a byproduct of Stericycle's competitive positioning and we believe it paves a multi-­‐year runway for double-­‐digit growth.

    From David Rolfe (Trades, Portfolio)'s Wedgewood Partners first quarter 2014 commentary.  

  • David Rolfe Comments on Varian Medical Systems

    Varian Medical Systems (VAR) has been a staple in our portfolio since the fall of 2005. The stock has rebounded smartly, up +31% from its April 2013 lows through the first quarter. Varian continues to be the global market share and technological leader in the radiation oncology business. Unfortunately, the incidence of cancer continues its deadly growth. In the U.S. alone, the American Cancer Society projects that some 1.7 million people will be diagnosed with cancer. Expectations of new cancer cases around the world are approaching 25 million over the next three decades. Of these new cases, approximately two-­‐thirds will be treated with some sort of radiation therapy. Varian has been at the forefront of linear particle accelerator since the late 1940's. Today the Company's installed base numbers over 7,300 LINACS across the globe – a 60% market share. As impressive as that may sound, the availability of state-­‐of-­‐the-­‐art radiation therapy (radiosurgery and proton therapy) outside of the U.S. is woefully low. The developed world has access to 35 to 110 LINACS per million people over the age of 65. In the U.S., it's 110 LINACS per million. Western Europe and Japan is 35 to 65 per million. In India, Africa, Eastern Europe and Southeast Asia there are between 1 and 20 machines per million. In China there is less than 10 machines per million. Complementing the Company's long-­‐term growth opportunity in radiation therapy is the secular trend in the "digitization of radiology," which is a key driver of their lucrative software and flat-­‐panel services business, plus their X-­‐ray tube replacement business that sells into the installed base of competing LINACS. The Company's initiatives to drive greater productivity continue to bear fruit. In 2013 sales per employee increased 14% and operating income per employee increased 20% over 2012 levels. Such productivity has helped the Company offset the continuing losses as they rollout their proton therapy machines. Cutting edge technologies such as proton therapy are one of the many reasons why cancer survivorship rates are up to nearly 70% from 50% from just the 1970's. You will be hearing much more about the marvels of proton therapy in the years to come. The key benefit of proton therapy over the latest x-­‐ray technology is that proton beams, due to proton's relatively larger sub-­‐atomic mass, can be controlled and stopped at the tumor. Conventional X-­‐rays particles cannot be 3 stopped and risk damaging surrounding healthy cells. Due to the exceptional accuracy of a proton beam, the oncologist can more safely deliver much higher doses of radiation (hypofraction), which kills cancer faster with fewer treatments. Furthermore, tumors that are close to vital organs are ideal for proton therapy. These include head and neck, breast, lung, gastrointestinal, prostate and spine. Proton therapy is also ideal for children to avoid longer-­‐term side effects of traditional radiation therapy. The advantages of this therapy have been known since the 1940's, but the cost of commercialization has been a nearly insurmountable hurdle. The Varian proton therapy equipped facility at the Scripps Proton Therapy center in San Diego just went online in January. This $220 million, 102,000 square-­‐foot, facility is only the 15th proton therapy facility in the U.S. At its core sits a 95-­‐ton superconducting cyclotron where the proton beam is generated using oxygen and hydrogen to create a plasma stream. Protons are then extracted and accelerated to roughly 100,000 miles per second. Such miracles of science and technology (Cincinnati Children's Hospital just recently placed a proton order) come at considerable costs. The Company needs to get the costs of such systems below $25 million in order to drive any meaningful growth and profitability from proton therapy. Given Varian's long and exceptional history of innovation with LINACS, combined with proton therapy's high barriers to entry, we believe the Company is well-­‐positioned to eventually reap a substantial proportion of any potential financial rewards generated by this ground-­‐breaking technology. Stericycle continued its steady streak of growth. Last quarter earnings per share were up 12%, driven by a 13% increase in revenues, compared to the December 2012 calendar quarter. Stericycle is able to methodically deliver such growth through a unique combination of organic and inorganic means. For instance, during the quarter they closed eight acquisitions that will generate roughly $34 million in incremental annual revenues. As for the Company's competitive positioning, the regulated medical waste industry market opportunity is roughly $10.5 billion spread across a highly fragmented competitive field, consisting of regional or local players, with none generating revenues above $100 million.

    From David Rolfe (Trades, Portfolio)'s Wedgewood Partners first quarter 2014 commentary.  

  • David Rolfe Comments on Schlumberger

    Schlumberger (SLB) was a top performer during the quarter, continuing its strong performance since the summer of 2012. Since late June 2012 (6/22) through mid-­‐ April 2014, the stock (a holding since late September 2011) is up approximately 60% -­‐ nearly double the S&P 500 Index's gain of 36%. Schlumberger continues to do what it does best – dominate their respective industry and generate industry-­‐ leading growth and cash flow generation. The Company is a leading global provider of oil services. At the risk of repeating an oil service industry cliché, "the easy oil has been found." The technological development being brought to bear to the extremes and complexities in the exploration and development of hydrocarbon energy is relentless. The Company's depth and breadth of their integrated products and services has been at the forefront of the unceasing progress of energy services for decades. Indeed, according to the Company, over the past decade, total E&P capital expenditures have increased by 400%, yet global oil production is up only a scant 15%. Furthermore, in just the last three years, the upstream E&P industry has spent on average $600 billion per year yielding only a net increase in global oil production coming from the shale deposits in North American. Due to the significant advancements in horizontal drilling and multistage fracking natural gas prices are generally one-­‐third of what they are in Europe or Asia. This differential has had 2 profound implications, for instance in the U.S. chemical industry. Chevron Phillips just this month broke ground on a $6 billion ethane cracker plant in Texas – the first petrochemical refinery built in the U.S. in twenty-­‐five years. Circa-­‐2014 finds the Company at the cutting edge in the continued search for unconventional oil and gas, plus in the environmentally challenging area in offshore and deepwater. The Company continues to enhance their capabilities, scale and integration with strategic acquisitions – including of late, Rock Deformation Research (geological software), Saxon (international land drilling), Gushor (petroleum geochemistry and fluid analysis) and GeoKnowledge (exploration risk and resource software). In an inherently cyclical industry, Schlumberger is a beacon of consistent profitability – posting net margins regularly between 12½% and 14½%. Free cash flow over the past twelve months ($5.8 billion) is 90% higher than the last cyclical peak in calendar 2007. Schlumberger is the only peer-­‐related company that has increased margins and generated double-­‐digit growth in operating earnings and earnings per share over the past two years.

    From David Rolfe (Trades, Portfolio)'s Wedgewood Partners first quarter 2014 commentary.  

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