Steven Romick

Steven Romick

Last Update: 01-13-2015
Related: First Pacific Advisors
Robert Rodriguez

Number of Stocks: 66
Number of New Stocks: 11

Total Value: $11,030 Mil
Q/Q Turnover: 17%

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

Steven Romick Watch

  • Steven Romick’s Top Growth Predictable Stocks

    As the co-managing partner of Los Angeles-based First Pacific Advisors LLC, Steven Romick heads the firm’s Crescent Fund, through a contrarian value strategy. Romick has helped deliver about 125 percent cumulative return over the last 10 years, beating the S&P 500 by a long shot.

    A former GuruFocus premium member, he is the ultimate bottom-up, absolute value investor with a long-term focus, relying on price and focusing on the macro economy to drive his valuations.  

  • Steven Romick Adds to Microsoft, AIG and Interpublic Group

    Of the $20 billion FPA Capital has in assets under management, Steven Romick manages $9.9 billion in its Crescent Fund, none of which he saw fit to invest in new stocks for the second consecutive quarter. The contrarian value investor instead added the most to Interpublic Group (IPG), Microsoft Corp. (MSFT) and American International Group Inc. (AIG).

    His large cash holding right now, however, indicates he is not finding anything new that is attractively priced. Romick described his investing philosophy in his October interview with GuruFocus: “Well, we are primarily bottoms-up analysts,” he said. “If a business is cheap or an asset trades at a discount we’re interested. But we always have an eye to protecting capital. That’s where our macro considerations come in.”  

  • FPA Capital Fund Inc. Quarterly Commentary

    After underperforming the first two quarters of the year, your portfolio outperformed its benchmarks in the third quarter of 2012. However, the performance still lags the benchmark on a year-to-date basis. The fund’s elevated cash level has contributed roughly 250 basis points of performance drag thus far in 2012, but our absolute value strategy necessitates that we hold cash when there is a dearth of value in the markets we follow.

    We have articulated many times over the last couple of decades that cash is a residual of investment opportunity, and we do not target a certain percentage. That is, cash levels are low when there is an abundance of value and high when there is a scarcity of absolute value opportunities. We think of cash as an asset that has no duration, but provides an embedded call option that can be exercised when quality assets are cheap and on sale.  

  • Steve Romick Comments on Ensco

    Ensco (ESV)10 Whereas Walmart is an example of a type of "compounder" we like to buy, Ensco is an example of a "3:1" - a purchase we make when we believe the potential upside is 3x larger than the potential downside. We haveowned Ensco for a number of years, and it has also been discussed in the past, along with our investments in other oil service companies. 11 Ensco is an average business with no long-term competitive advantages. It seems that to effectively compete, a rig company only requires capital and a contract with an Asian shipyard. Such ease of market entry convinces us that a company that builds a rig and then leases it should not expect to earn more than a 10% to 12% long-term return on capital. In a tight market, demand exceeds the number of rigs available, and return on capital rises above the long-term average. At such times, one generally expects to see new orders for rigs. As those rigs come to market a few years down the road, day rates, and thus returns on capital, decline.

    Earnings at Ensco and other oil service companies are currently above our expectations for normal returns on capital due to a shortage of available rigs. Capital and time will correct that. Currently, there are lots of rigs under construction. In 2013, 35 new jackup rigs will be built and delivered, an increase of 8% to the current worldwide fleet of 426. Additionally, 21 new floater rigs will be built and delivered, an increase of 7%  

  • Steve Romick Comments on Walmart

    Walmart: Walmart's earnings met or exceeded expectations in the last year a nd concerns about its ability to grow dissipated, triggering renewed investor interest in the company. Not much changed in Walmart's fundamentals, but the stock price and P/E 2 moved higher. With our investment having exceeded our return expectations and greater downside risk accompanying the higher stock price, we scaled back our stake. We'll use Walmart to illustrate how an investment can come full circle – from buy to sell. Our original thesis, laidout in our 2010 Q4 commentary, is reprinted below.

    Walmart (WMT) seems anomalous in a world where stocks have rebounded so dramatically from the stock market's 2009 bottom. Walmart's stock averaged $48.59 in February 2009…. At that price, it traded at a TTM 3 and Forward P/E 4 of 14.5 and 13.0x, respectively. Walmart closed 2010 at $53.93 per share – more dear in price but cheaper in valuation – trading at a lower TTM and Forward P/E of 13.3 and 12.1x, respectively.  

  • Steven Romick Owns French Car Maker Renault, Shorts Nissan and Volvo

    In an interview on WealthTrack with Consuelo Mack, FPA Capital’s Steven Romick put forth a complex play on the auto industry and European crisis: buying long Renault (RNO_FP) shares and shorting Volvo (VOLVY) and Nissan (NSANF). The positioning, he said, is resulting in him getting paid to own Renault.

    Renault interested Romick because it was associated with two of his favorite criteria – an out-of-favor industry and lots of bad news. The auto industry has suffered, but Renault, an auto manufacturer, is based in France, where new car registrations declined 13.8% from January to September 2012 compared to the same period of 2011. More broadly, in the EU, the new car market contracted by 7.6%.  

  • Steven Romick on WealthTrack

    Steven Romick on WealthTrack: On this week’s Consuelo Mack WealthTrack, a rare interview with Great Investor, Steven Romick of FPA Crescent Fund. Romick describes how he is keeping his five-star rated fund on top by balancing the forces of inflation and deflation and continuing his contrarian, value-oriented strategies.

    FPA Crescent Fund; 10-year averaged 9.85%.  

  • Steven Romick Buys Analog Devices, Adds to IPG, AIG and ORCL in Third Quarter

    Portfolio manager of the FPA Crescent Fund and Contrarian Value Strategy at First Pacific Advisors, Steven Romick, added one new domestic stock to his portfolio in the third quarter: Analog Devices Inc. (ADI). The largest additions to the 10 holdings he increased are: Interpublic Group of Companies Inc. (IPG), American International Group Inc. (AIG) and Oracle Corp. (ORCL).

    Romick’s diversified, risk-averse FPA Crescent Fund gained almost 20% over the 12 months ending June 30, 2012. He continues to employ his bottom-up value strategy of buying cheap, typically out-of-favor assets at discounts that would prevent permanent impairment of capital, which he discusses in his October GuruFocus interview.  

  • Steven Romick’s Latest Sells as of 9/30/2012

    As FPA Crescent Fund’s portfolio manager, investment Guru Steve Romick has made updates to his portfolio picks for the end of the third quarter. Below are the four companies of which he made stock reductions.

    PetSmart Inc. (PETM)  

  • Interview with Steve Romick, Portfolio Manager of FPA Crescent

    GuruFocus readers recently got to ask Steve Romick, FPA Crescent portfolio manager, their questions about investing. Romick's mutual fund FPA Crescent Fund is up 19.76% over the last year and has delivered an annualized return exceeding 9% over the last decade. His fund is slightly different from most mutual funds in that it is diversified across a different basket of asset classes to provide equity rates of return with less risk.

    Here are Steve Romick's answers to readers' questions:  

  • Steven Romick on Stock Picks, Bonds and Farmland

    Steve Romick of First Pacific Advisors discusses his investment procedure on CNBC. Romick has a diverse variety of investments in his portfolio, including corporate bonds, stocks and farmland. His favorite picks are Renault (EPA:RNO), Omnicare (OCR) and Rhino Resource Partners (RNO). He is short Volvo and Nissan.


  • Q&A with Investor Steven Romick of FPA Funds

    Top investor Steven Romick will join GuruFocus for an interview this month. You can ask him a question related to investing by leaving it as a comment below. GuruFocus will receive his answers via a phone interview in the next several weeks.

    About Steve  

  • Stocks Owned by Both FPA Capital Fund and FPA Crescent Fund

    FPA family of funds have built impressive track records. Among the two stock funds in the family, FPA Capital Fund has been run by the legendary Robert Rodriguez, and FPA Crescent Fund by Steven Romick. FPA Capital Fund has averaged 14.45% since inception in 1984. FPA Crescent Fund has gained 10.6% a year since inception in 1993.

    A major difference of FPA funds from other value shops is the FPA funds does put quite a lot research to macroeconomic picture, and they are very good at it. They predicted the housing price collapse and financial crisis well before crisis hit, and they were prepared by avoiding financials. Currently they are weighted in energy stocks as they think that over long term, oil will be more expensive and do well.  

  • The Stocks Steven Romick Keeps Buying

    Steven Romick is a strict bottom-up investor who does not neglect the macro picture. In the second quarter he finds stocks neither particularly cheap nor particularly expensive, according to his second-quarter commentary on his FPA Crescent Fund. He believes that Central Bankers are leading the world to inflation where his stocks should at least perform “nominally well,” but says, “If a business or asset is good and cheap – absolutely, not relatively – we'll buy it.”

    These are the stocks the fund manager keeps buying: Aon (AON), Cisco (CSCO), WellPoint (WLP) and Walmart (WMT).  

  • Crescent Fund's Steven Romick Comments on CareFusion

    From the second quarter commentary of Crescent Fund's Steven Romick:

    CareFusion We recently made an investment in CareFusion (CFN), a leading medical technology company serving hospitals in the United States and abroad. In this country, it has dominant market positions in a majority of its businesses. CFN's products and services are particularly attractive because they help lower hospitals' operating costs. With new, highly motivated and experienced management at the helm, we believe CFN could improve its R&D productivity and grow international sales at a faster rate. This should translate into better long-term EPS growth. Management's actions to date should increase the company's operating margin to a level more commensurate with its strong share position and in line with similarly positioned medical device companies. The company is trading at ~10x cash earnings and it has minimal net debt leverage, so we find CFN to be an attractive investment.  

  • Steven Romick FPA Crescent Fund Quarterly Commentary

    FPA Crescent declined 2.9% in the second quarter amidst global market weakness, but increased 3.5% for the first half. We continue to maintain our conservative posture given our cautious outlook that we lay out in the commentary below.

    The top individual contributors and detractors from our quarterly performance are as follows:  

  • Six New Buys from Steven Romick: ORCL, AIG, BK, Y, XRX, VOLV.B

    Steven Romick manages the $9 billion Crescent Fund for FPA Capital. His primary objective with his portfolio is to avoid permanent impairment of capital, rather than simply try to match the market. He believes this can be best done by understanding the downside risk of each stock. A motto at his fund, as he tells CNBC, is, “Good things happen to cheap stocks.”

    Romick found six new stocks in the second quarter: Oracle Corp. (ORCL), AIG (AIG), Bank of New York Mellon (BK), Alleghany Corp. (Y), Xerox Corp. (XRX) and Volvo (VOLV.B).  

  • Steve Romick: Fed Experiment Won't End Well

    The Fed's attempts to manage risk assets could have severe ramifications, argues the FPA Crescent manager.

    Speaking in reference to the U.S. Fed's monetary policy and the increasing indebtedness with greater Treasury issuance and what implications it will have on asset classes over next three to five years, he said, "We are living in a grand experiment. We have never lived through times like this before. We have never executed policy in this fashion, like we are doing now. And how it ends is anybody's guess, but just in simple terms, I think by avoiding the ability to clear prices at a normal low level as historically has happened in the past, the Fed's trying to step in and manage risk assets to too great a degree. I don’t think it's going to end well."  

  • Steven Romick's Top Stock Picks

    Steven Romick, First Pacific Advisors portfolio manager, discusses his goal to beat the market while reducing risk, and reveals his top stock picks, including CVS (CVS) and Microsoft (MSFT), with CNBC's Tyler Mathisen.

    Steve's top holdings: CVS Pharmacy, Aon (AON), Walmart (WMT), Covedien (COV) and Microsoft.  

  • Steven Romick on Renault

    Renault, the French auto manufacturer, owns significant stakes in publicly traded companies, including Nissan, Volvo and Daimler. One can effectively hedge out (i.e., short) Renault’s ownership interest in these entities and create a “stub” representing Renault’s own auto manufacturing operations. Given that the pre-tax value of Renault’s public stakes is worth approximately 130% of its own share price, one is effectively being paid to own Renault. Recently, we took advantage of our flexible mandate to create the so-called Renault stub and have the market pay us €5 billion to own Renault’s core operations, which earned pre-tax income in excess of €1 billion in 2011. Though Renault faces a tough operating environment in Europe, we believe its auto business is worth something. Therefore, we purchased Renault and shorted Nissan and Volvo. Over the past decade, the Renault stub has experienced periods of both positive and negative valuation in the market. We first executed this trade profitably in 2006 and now, given its healthier balance sheet, better geographic mix and improved profitability, we are happy to reestablish a position. We believe the value that is being given away has less financial risk than in the past. If the Renault stub trades up to just a zero value, the outcome would be nicely accretive.  

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User Comments

Dr.Oleg V Anokhin
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ReplyKeithlevy1234 - 8 months ago
No its a pair trade he did.
ReplyJoeDaWealthManager - 11 months ago
Why short VZ? Is it a race to the bottom on price plans?

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