David Rolfe

David Rolfe

Last Update: 2014-02-14

Number of Stocks: 21
Number of New Stocks: 0

Total Value: $4,808 Mil
Q/Q Turnover: 8%

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

David Rolfe Watch

  • Wedgewood's David Rolfe Wagers in Favor of Berkshire in High-Stakes Bet

    It takes a lot chutzpah to bet against Warren Buffett (Trades, Portfolio) — arguably the greatest investor in history. Yet much to my own surprise, that’s exactly the position I've unexpectedly found myself in.

    Here’s how it all happened:  


  • Coach: A Champion Among Luxury Retailers

    As a luxury brand retailer, Coach Inc. (COH) enjoys strong pricing power, sourcing and distribution advantages, as well as capital efficiency, making it one of the top companies in the industry with a narrow economic moat. Its high quality handbags and accessories, sold at a more attractive price than its competitors, have garnered a large customer base with strong brand loyalty, resulting in a business with excess economic profits. Therefore, it should come as no surprise that investment gurus like John Griffin (Trades, Portfolio) and David Rolfe (Trades, Portfolio) recently acquired over 1 million shares in this company, hoping to gain long term rewards.


    Of Capital Efficiency and International Expansion

      


  • Wedgewood Partners' Views on 2014

    While our primary task is to be “bottom-­up” owners of terrific businesses, rather than the less predictable, less profitable and certainly less satisfying task of economic or stock market forecasting, we would like to offer our views on the current investing environment. In short, we expect much of 2014 to be the opposite of 2013. Further, we expect Main Street to outperform Wall Street. We expect better than expected economic growth, better employment - and correspondingly higher than expected inflation and interest rates. Even a cursory dive into the latest employment figures shows that the college-plus segment is near full employment. Leading economic indicators have currently crept back up to 3-­year highs. Relatedly, what may be better for the economy, may very well likely challenge current exuberant financial markets - particularly the stock market. Higher interest rates and higher inflation could cause a deflation-­obsessed Fed to "taper" much sooner than their official policy statements.


    As such, any surprises in interest rates and inflation could well be to the upside and prove to be, in our opinion, a considerable headwind for the stock market. 2013 was a year of P/E multiple expansion. 2014 may well be the opposite. We also expect more volatility (read: downside) throughout 2014. Our more specific evolving views on the broad stock market echo our thoughts from our last couple of Client Letters. As much as pessimism and fear ruled the day back in late 2008 and early 2009, we are of the current view that we are in the midst of a bull market in optimism. In short, we expect evolving Risk-avoidance to trump Reward-chasing in 2014.

      


  • David Rolfe on Charles Schwab Corp.

    Charles Schwab was our largest relative contributor to performance. The stock gained +82% in 2013 – after a gain of 30% in 2012. We trimmed the position throughout the year and fully exited the position at the end of October. Our sale rationale is quite succinct. Schwab remains a best-in-class business, but the stock, in our view, had become less than best in class (read: overvalued)....


    For instance, we liquidated our stakes in Charles Schwab during the fourth quarter, as we believe several years of Schwab’s future earnings power were sufficiently recognized by Mr. Market in current prices. While the Company has continued to grow and take profitability share via its superb low-cost, internet-based platform, our analysis of the stock’s valuation suggests that the implied earnings power of the business is not only taking current business momentum into account, but also giving shareholders ample credit for higher short-­term interest rates, even though short-­term rates are currently anchored near zero. Admittedly, valuation is somewhat of a blunt tool, given the wide array of future assumptions, however, we believe that valuation becomes clarified and much sharper too as time passes.

      


  • Worldly Wisdom and Advice, from David Rolfe of Wedgewood Partners



  • David Rolfe Comments on Perrigo

    During the quarter, Perrigo (PRGO) announced strong September quarter adjusted earnings growth of 20%.  We say “adjusted” because the Company incurred what we believe are non-recurring charges related to the recent purchase of Elan Corporation, which is a branded-drug company domiciled in Ireland.  Upon the closing of this purchase, Perrigo has “re-domiciled” itself in Ireland, with an effective tax rate meaningfully below what they were subjected to in the U.S.  Given that the Company actively pursues a strategy of inorganic growth as much as it pursues organic growth - having acquired six new businesses over the past 18 months (including Elan) - we expect that this new tax structure should make future acquisitions, particularly those U.S. based businesses, much more attractive.  Further, Perrigo’s core business, which includes private-label over-the-counter (OTC) pharmaceuticals and infant formula, drove much of the year-over-year growth.  The Company’s unrivaled scale in manufacturing and marketing of store-branded offerings continues to enable retailers to mimic the value proposition of OTC pharmaceuticals and infant formula.  This “store-brand conversion” is a multi-year trend that we expect will continue for the foreseeable future as consumers continue to become more value-conscious, yet more comfortable with store-brand quality that Perrigo helps engineer. 


     

      


  • David Rolfe Comments on Cognizant

    Cognizant (CTSH) continued to execute well on its value proposition of providing deep domain expertise for outsourced enterprise IT.  As IT has rapidly evolved in the face of a “devolving” macroeconomic backdrop, outsourcing customers are demanding more value-added services to not only convert fixed IT costs into variable costs, but to improve business agility and drive revenues. Cognizant has aggressively reinvested to meet and exceed these demands, cultivating a relationship-based approach that relies on a much larger on-site presence compared to transactionally-based peers.  In turn, customers have given Cognizant more “wallet share,” to the point where revenues have routinely grown at a 20% clip.  We expect emerging trends, such as the proliferation of mobile IT as well as the perpetual trend of IT infrastructure transformation to drive double-digit growth well into the future.


     

      


  • David Rolfe Comments on Apple Inc.

    Our thesis that innovation is alive and well at Apple – a minority position to be sure over the past year – has been vindicated, in our view, given that the Company refreshed their entire suite of hardware and operating software systems in the second half of 2013.  Apple (AAPL) continued to expand its iPhone franchise, selling close to 34 million units during the September quarter, representing a 25% increase over the year ago period.  Much of this growth can be attributed to the successful roll-out of the iPhone 5S and 5C, Apple’s most recent updates to this key business line.  The Company also continues to upgrade the broad array of services that make up the platform in support of the iPhone (as well as the iPad and Mac), including content (iTunes, App Store, iCloud) and software (iOS).  We think Apple’s platform approach drives a differentiated user experience which leads to a “stickier” customer, which in turn drives customer intentions to repurchase Apple products at significantly higher rates –and profits - than their competitors.  As smartphones proliferate, we expect consumers will become increasingly critical and demanding of their user experience - a trend that we expect Apple will be able to capitalize upon as competitors continue to maintain their focus on selling an experience that is only “good enough” for smartphone newbies.  We expect the Company to generate renewed earnings growth over the course of calendar 2014 approaching $50 per share.  Even after the +45% advance in the stock from past summer, we view the current risk/reward in the shares (and in consideration of the cash build on the balance sheet) quite favorable.


     

      


  • David Rolfe Comments on EMC

    EMC (EMC)’s stock was flat over the course of 2013.  In fact, the stock has been flat over the past three years – sigificantly underperforming the near 50% gain in the S&P 500 Index.  The stock has been buffetted over fears that the Company’s current decelerated growth is in secular decline due to a number of competitive threats.  The first threat is that flash storage and software-defined storage will cannibalize traditional hard disk drives.  Two, the public cloud is only a threat (and not an opportunity) that disintermediates information technology (IT) spend from both EMC and VMware (EMC maintains an over 80% ownership stake in VMW).  Third, VMware’s entrenched vSphere gets displaced by Open-Source and Microsoft’s Hyper-V.  Fourth, recent premium-priced acquisitions of Data Domain and Isilon are evidence of lack of internal product development.


    EMC’s products – both hardware and software - are litearlly a geek’s wonderland alphabet soup, which include Storage Area Network (SAN), Network Attached Storage (NAS), Direct Attached Storage (DAS), Virtual SAN, All-Flash XtremIO, Atmos, Avamar,  Data Domain, Isilon, Pivotal, ViPR Software Defined Storgae, VMAX, VNX, VNXe, VPLEX, VSPEX (none of these are typos).  Information storage makes up 70% of revenues and virtualization 23% of revenues.  Products generate 55% of revenues.  Services generate 45% of revenues.  The Company’s gross profit split is approximaltey 67% data storage and 31% virtualization.

      


  • David Rolfe's Wedgewood Partners Fourth Quarter 2013 Client Letter

    Review and Outlook


    Our Composite (net-of-fees) gained approximately +10.9% during the fourth quarter.  This compares relatively favorably to the gains in the Standard & Poor’s 500 Index of +10.5% and +10.4% in the Russell 1000 Growth Index.  For the full year we are quite pleased to report that our Composite (net) gained +30.3%.  However, we are not so pleased to report that our performance for the year trailed the gains in both the stock market +32.4% (S&P 500 Index) and our benchmark +33.5% (Russell 1000 Growth Index).  Through the prism of risk/reward, we are most pleased with our 2013 upside/downside capture ratio versus the S&P 500 Index.  We only “captured” approximately 86% of the upside in 2013, but just 46% of the downside for a ratio of +1.84 - one of our best calendar years in our 21-year history.

      


  • Wedgewood Investor David Rolfe Buys One New Stock

    CIO of Wedgewood Partners David Rolfe in the third quarter purchased a single new stock: M&T Bank Corp. (MTB). Rolfe’s portfolio contains 22 stocks total and is valued at $4.17 billion. The largest sector represented is technology at 33.4%, followed by financial services at 19.7%. For the third quarter, his fund returned 8.76%, outpacing the S&P 500 index’s 5.24%.

    As a long-term oriented value investor, Rolfe’s primary deterrent to making more purchases during the quarter was price, as he stated in his investor letter:  


  • David Rolfe Interview with The Wall Street Transcript

    TWST: Tell us about Wedgewood Partners and the inception of your current strategy.  


  • David Rolfe Comments on M&T Bank

    M&T Bank (MTB)

    Warren Buffett has oft remarked of Berkshire's ownership of the jewelers Borsheim's Fine Jewelry, Helzberg Diamonds and Ben Bridge Jewelers, "...if you don't know jewelry, know the jeweler." The same could be applied to Buffett's views on banking and bankers. The list of Warren Buffett's favorite bankers - and it's a short list to be sure – include the likes Jamie Diamond (J.P. Morgan Chase), Dick Kovacevich (Wells Fargo/Norwest) and Brian Moynihan (Bank of America). Of these three, Berkshire owns multi-billion stakes in both Wells Fargo ($20 billion) and Bank of America ($5 billion 6% preferred and 700 million warrants – warrant strike price $7.14, current share price $14.) Berkshire also owns a $3 billion stake in U.S. Bancorp.  


  • David Rolfe Comments on Coach

    Coach (COH)

    Coach's stock retreated from gains experienced during the 2 nd Quarter as the Company's same store sales (SSS) in North America disappointed the market. While we pay attention to the trajectory of North American SSS, we are more interested in the Company's consolidated growth and profitability. We think Coach continues to have robust opportunity on both scores as they penetrate markets that are underserved by affordable luxury players and also expand the brand into new product categories in more established markets. We think the Company's peer-leading profitability will be maintained as it continues to own and operate the distribution fronts for nearly 90% of its revenue, a quarter of which we estimate is generated in markets where western luxury competitors have little or no presence, due to a lack of brand awareness and/or distribution capabilities.  


  • David Rolfe Comments on Monster Beverage

    Monster Beverage (MNST)

    Monster Beverage detracted from performance as revenue growth decelerated in the face of negative press related to the safety profile of energy drinks. Despite this transient headwind, the brand continues to take share, profitably, from traditional carbonated soft drinks. We continue to expect the Company's growth profile, over a multi-year period, will eclipse double-digits, despite periodic negative press. Energy drinks continue to be a highly disruptive offering in the beverage industry, driven by a generational shift in preference for caffeinated products. While the level of caffeine in the typical Monster Energy drink is higher than most traditional carbonated soft drinks, it has half as much (per ounce) than most popular coffee house offerings. We believe this relatively new value proposition should position Monster to continue taking share from traditional beverage incumbents.  


  • David Rolfe Comments on Cummins

    Cummins (CMI)

    Cummins contributed to performance during the quarter as the Company's profitability marched higher in the absence of any direct, global competitors. While Cummins' top-line growth is typically "lumpy", particularly due to the capital intensity of their products, margins have been maintained through pricing power and cost efficiencies. We continue to like Cummins as its long-term profitability profile is much more robust than what the market gives it credit for.  


  • David Rolfe Comments on Apple Inc.


  • David Rolfe Comments on Cognizant Technology Solutions

    Cognizant Technology Solutions (CTSH)

    Cognizant was our biggest contributor for the quarter. Portfolios had Cognizant as a top weighting, as we aggressively added in the 2 nd quarter, when we believed concerns about punitive legislation contained in proposed immigration reform were more than discounted in the stock. This quarter, the stock recovered nearly a third, as the market decided that said punitive legislation was less probable than originally believed. As a result of this relatively large incline in valuation, we trimmed positions, though Cognizant remains a top holding.  


  • Wedgewood Partners 3rd Quarter 2013 Review - David Rolfe

    Review and Outlook: Our Composite (net-of-fees) gained approximately +8.76% during the third quarter of 2013. This compares favorably to the gains in the Standard & Poor's 500 Index of +5.24% and +8.11% in the Russell 1000 Growth Index. Through September 30, our year-to-date 2013 performance of +17.4% trails both the stock market and our benchmark of 19.8% (S&P 500 Index) and +20.9% (Russell 1000 Growth Index).

    During the quarter we trimmed back positions in Charles Schwab and Cognizant Technology and we added to existing positions in Perrigo. Our only new position was the purchase of M&T Bank (our first new purchase since October 2012). We did not eliminate any holdings during the Quarter.  


  • Guru David Rolfe's Top Five Second Quarter Positions

    During the second quarter David Rolfe did not add any new holdings, but he did increase his position in 18 different stocks. As of the second quarter, Rolfe holds 21 stocks valued at $3.463 billion.

    The following five companies represent Rolfe’s top five positions as of June 30.  


Add Notes, Comments or Ask Questions

User Comments

No comment yet



Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK
Hide