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Bob Rodriguez of FPA Capital Reveals Four New Adds, No New Buys
Posted by: guruhl (IP Logged)
Date: July 23, 2012 05:07PM
Robert Rodriguez has managed the FPA Capital Fund (FPPTX) and FPA New Income Fund since inception in 1984, and is best known for calling the 2008 housing crash. He recently returned from a one-year sabbatical in 2010, only to find that the markets are repeating the ill-advised patterns of the past. He did not buy new stocks in the second quarter, but added to four of his holdings: DeVry Inc. (DV), Newfield Exploration Co. (NFX), InterDigital (IDCC), Patterson-UTI Energy (PTEN).
DeVry Inc. (DV)
Robert Rodriguez bought 629,867 shares of DeVry at an average price of $30 in the second quarter. This was added to the 53,600 shares he bought in the first quarter at an average price of $38 per share, bringing his total holding to 682,867 shares.
DeVry, one of North America’s largest for-profit education companies, saw its stock fall more than 58% in the last year. A pronounced dive from about $66 to $40 occurred from mid-July to mid-August 2011, as the company announced a 25.6 percent drop in enrollment from the previous year. The company attributed the decline to both the prolonged economic downturn causing people to postpone returning to school, and new government regulations of the industry, which was having a “near-term negative impact.”
Prior to the fourth quarter 2011, the company’s enrollment had been increasing by double digits for an extended period. In the most recent third quarter results, announced March 31, 2012, DeVry’s undergraduate enrollment had dropped 19.7% from the previous year. Net income also decreased 28% and revenue fell 4% from the previous year.
Baron Funds commented on DeVry that it noted the top and bottom-line declines but: “Long term, we remain positive on DeVry given its solid history of graduate placement and its focus on areas that should experience sustainable job creation.”
Newfield Exploration Co. (NFX)
Rodriguez bought 441,888 shares of Newfield Exploration at an average price of $31 in the second quarter. This was added to the 645,312 shares he had accumulated over the years starting in the fourth quarter of 2008, when the stock price was just $21 on average. His holding at the end of the quarter totaled 1,087,200.
Newfield Exploration, which develops and acquires oil and natural gas properties primarily in the Gulf of Mexico, saw its stock slid almost 57% in the last year. The stock ended 2011 under $40, off its mid-year high of about $50. In the second quarter of 2011, the company announced that its full-year oil production would be at the low end of its original guidance of 312 to 323 Bcfe, an 8% increase over the previous year, due to repairs in its Abu field in offshore Malaysia that deferred production. The field was repaired and back in operation by the time quarterly results were announced.
The company announced its production expectations for 2011 in July. They forecast that their oil/liquids production will increase nearly 30% over 2011, as the company continues its shift to oil that it began in 2009 and over half of its production for 2012 will be oil. The company raised its 2012 expectations for the second time this year to 296 to 304 Bcfe.
InterDigital Inc. (IDCC)
Rodriguez bought 400,948 InterDigital shares at an average price of $28 in the second quarter. This is in addition to the 519,700 shares he bought in the second quarter of 2011 and first quarter of 2012 at average prices of $42.50 and $39. His holding at the end of the second quarter totaled 920,648 shares.
InterDigital a digital wireless telecommunications systems company, saw its stock decline almost 63% over the last year. In the first quarter of the year, the company’s revenue decreased 12%, patent licensing royalties decreased 11%, and net income decreased 53% from the previous year. The company is also mired in litigation with companies including Nokia (NOK), LG, Huawei and ZTE for 3G patent infringement. Intellectual property enforcement and non-patent litigation cost the company approximately $12.3 billion in the first quarter 2012 and $4.1 million in the first quarter of 2011.
InterDigital also signed five new or expanded license agreements in the first quarter and recently sold $375 million in patents to Intel, which has released three smartphones and is developing over 20 tablets.
Patterson-UTI Energy Inc. (PTEN)
Rodriguez bought 109,000 Patterson shares in the second quarter at an average price of $15. He had a large holding in the company that predates 2008, but since 2009 he has only been selling shares. His total holding at the end of the second quarter was 844,300 shares.
Patterson, one of the top domestic land drilling services providers to oil and natural gas companies, saw its stock decline almost 55% in the last year. FPA Capital commented on its Patterson holding in its second-quarter 2011 commentary, after the stock had climbed to 52-week highs and just before it fell back to end the year essentially flat: “Patterson-UTI Energy, the leading land rig company in the U.S., continued to benefit from increased drilling. The company has performed well by adding new rigs to its fleet, taking advantage of demand for the higher-end equipment that is needed and preferred in the more demanding shale developments. Patterson-UTI has also added significant frac capacity over the last few years. This is now paying off since this equipment is being used in shale developments.”
The company’s first-quarter 2012 net income increased 37% to $97.3 million over the previous year on continued U.S. rig activity growth, and it increased its number of rigs operating to 237 from 232 in the previous quarter. The company is able to transition its rigs from dry gas to oil and liquids rich markets, as demand decreases for natural gas.
Patterson also added a new chief operating officer in April and announced that its CEO would retire later in the year.
Rodriguez seems to like oil and gas plays this year as his top two holdings are in the sector: Rowan Companies (RDC) and Ensco Plc (ESV). His top five holdings are rounded out with Avnet Inc. (AVT), Arrow Electronics (ARW) and Western Digital Corp. (WDC).
To see more of his buys and sells, see his portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of Robert Rodriguez.
Guru Discussed: Robert Rodriguez: Current Portfolio, Stock Picks
Stocks Discussed: DV, NFX, IDCC, PTEN, FPPTX, RDC, ESV, AVT, ARW, WDC,