GuruFocus Premium Membership

Serving Intelligent Investors since 2004. Only 96 cents a day.

Free Trial

Free 7-day Trial
All Articles and Columns »

FPA Crescent Fund Buys CVS, MSFT, WMT, AON, PFE, Sells PHG, CVX, HNT, GKSR, LOW

gurufocus

gurufocus

338 followers
FPA Crescent Fund released its fourth quarter portfolio. The fund is run by Steven Romick, who has achieved impressive long term market beating record. These are the details of the buys and sells.

Steven Romick buys CVS Caremark Corp., Microsoft Corp., Wal-Mart Stores Inc., Aon Corp., Pfizer Inc., Omnicare Inc., Total S.A., The Travelers Companies Inc., Covidien Plc., Occidental Petroleum Corp., Ensco Plc, sells Koninkl Phil E Ny Shares, Chevron Corp., Health Net Inc., G&k Services Inc., Lowes Companies Inc. during the 3-months ended 12/31/2010, according to the most recent filings of his investment company, FPA Crescent Fund. As of 12/31/2010, FPA Crescent Fund owns 61 stocks with a total value of $2.4 billion.

Like Don Yacktman, Arnold van den Berg and Jeremy Grantham, Steven Romick favors large cap companies now. Why? He wrote in his latest shareholder letter:

We continue our preference for owning larger capitalization companies as they are both less expensive (fact) and have better growth prospects (belief). The Russell 2000 (a reasonable small-cap proxy) trades at a 29.5 P/E, while the Russell 1000 trades at 17.4x earnings, 41% less expensive. In fact, small-cap stocks trade at close to their most expensive valuation vs. their larger rivals since 1982, as can be seen in the following chart from The Leuthold Group.

We think most investors recognize this small-cap/large-cap valuation disparity and have either chosen to focus on large-cap stocks (if they have the flexibility in their charter to do so), or do not believe that large-cap stocks can grow faster than their smaller counterparts. Generalizing (with a capital "G"), we believe that small-cap stocks are less efficiently priced, easier to understand, and more likely to be acquired, but they are less liquid, not cheaper, don't necessarily grow faster, and have less product diversification, less market dominance, and less of an international presence.

We surmise that greater overseas sales as a result of exposure to faster growing foreign economies has contributed to the fact that large-cap stocks (Russell 1000) have exhibited better earnings growth than small-cap stocks (Russell 2000), predicated on rolling 5-year trailing earnings growth since 1994.19 Even we were surprised by this 16-year winning streak. In the last 33 years, large caps exhibited better growth than small caps 70% of the time.

We expect the trend to continue, except for a possible blip due to the rebound from the recent recession (but we suspect that is already largely reflected in small-cap stock prices). As a result, your portfolio has its largest weighted average market cap in its 17.5 year history" $54.3 billion, as compared to our historic average of $13.1 billion.


He commented on PetSmart (PETM) and WalMart (WMT), the large cap stocks he continues to buy:

PetSmart (PETM)

We thought we would highlight PetSmart, the largest retailer of pet supplies and services in the U.S., because it was an investment we made despite concerns about the consumer and it exemplifies our strategy to buy the bad news. We first mentioned our investment in our 3rd Quarter 2009 commentary. We felt an investment in PetSmart in the low-$20s offered a very compelling risk/reward. Since then, the company has done everything management said it would and then some. Not only did it begin to reap the rewards of its store remodel program and distribution center rationalization, but it also entered new categories such as flea & tick and launched the Martha Stewart line in its stores. Management remained committed to returning excess free cash flow to shareholders by increasing its quarterly dividend by 25% and continuing to repurchase its attractively priced stock, which reduced the share count by 5%. These successful efforts helped boost PetSmart's trailing twelve month (TTM) EPS by approximately 15%. Even though the share price rose more than 80% in the past 17 months, the stock still trades at a relatively attractive valuation of less than 7x 2011 EBITDA and 14x after-tax free cash flow.20 Thus, we continue to hold our investment in what we consider one of the better American retail businesses with an excellent operational and shareholder friendly management team.

Wal-Mart (WMT)

Wal-Mart (WMT) seems anomalous in a world where stocks have rebounded so dramatically from the stock market's 2009 bottom. Wal-Mart's stock averaged $48.59 in February 2009 (We are using the average in the month its price hit bottom, as it seems more relevant since it is only the rare circumstance and good fortune that allows one to accumulate a position on the day the market decides to price a stock at a low). At that price, it traded at a TTM and Forward P/E of 14.5 and 13.0x, respectively. Wal-Mart 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.

For the details of Steven Romick's stock buys and sells, go to http://www.gurufocus.com/StockBuy.php?GuruName=Steven+Romick

This is the sector weightings of his portfolio:

Health Care 12.4%
Oil & Gas 12.3%
Consumer Services 7.4%
Technology 5.7%
Telecommunications 2.3%
Consumer Goods 0.9%
Industrials 0.7%
Financials 0.6%


These are the top 5 holdings of Steven Romick

  1. ENSCO PLC (ESV) - 4,055,000 shares, 7.94% of the total portfolio. Shares added by 1.38%
  2. AON Corp. (AON) - 4,383,000 shares, 7.4% of the total portfolio. Shares added by 10.68%
  3. COVIDIEN PLC. (COV) - 3,875,000 shares, 6.49% of the total portfolio. Shares added by 3.61%
  4. OCCIDENTAL PETROLEUM Corp. (OXY) - 1,645,000 shares, 5.92% of the total portfolio. Shares added by 2.17%
  5. CVS CAREMARK Corp. (CVS) - 4,483,085 shares, 5.72% of the total portfolio. Shares added by 641.01%


Added: Cvs Caremark Corp. (CVS)

Steven Romick added to his holdings in Cvs Caremark Corp. by 641.01%. His purchase prices were between $29.65 and $35, with an estimated average price of $31.98. The impact to his portfolio due to this purchase was 4.95%. His holdings were 4,483,085 shares as of 12/31/2010.

CVS/Caremark is the nation's premier integrated pharmacy services provider, combining one of the nation's pharmaceutical services companies with the country's largest pharmacy chain. Cvs Caremark Corp. has a market cap of $44.98 billion; its shares were traded at around $33.1 with a P/E ratio of 12.2 and P/S ratio of 0.5. The dividend yield of Cvs Caremark Corp. stocks is 1.5%. Cvs Caremark Corp. had an annual average earning growth of 12.4% over the past 10 years. GuruFocus rated Cvs Caremark Corp. the business predictability rank of 4.5-star.

Added: Microsoft Corp. (MSFT)

Steven Romick added to his holdings in Microsoft Corp. by 68.72%. His purchase prices were between $23.91 and $28.3, with an estimated average price of $26.33. The impact to his portfolio due to this purchase was 1.43%. His holdings were 3,425,000 shares as of 12/31/2010.

Microsoft develops, manufactures, licenses, and supports a wide range of software products for a multitude of computing devices. Microsoft Corp. has a market cap of $223.81 billion; its shares were traded at around $26.16 with a P/E ratio of 11.1 and P/S ratio of 3.5. The dividend yield of Microsoft Corp. stocks is 2.4%. Microsoft Corp. had an annual average earning growth of 12.6% over the past 10 years. GuruFocus rated Microsoft Corp. the business predictability rank of 3-star.

Added: Walmart Stores Inc. (WMT)

Steven Romick added to his holdings in Walmart Stores Inc. by 34.38%. His purchase prices were between $53.25 and $55.36, with an estimated average price of $54.18. The impact to his portfolio due to this purchase was 1.15%. His holdings were 2,275,000 shares as of 12/31/2010.

Wal-Mart Stores, Inc. is the world's largest retailer. Walmart Stores Inc. has a market cap of $185.47 billion; its shares were traded at around $52.07 with a P/E ratio of 12.7 and P/S ratio of 0.4. The dividend yield of Walmart Stores Inc. stocks is 2.3%. Walmart Stores Inc. had an annual average earning growth of 11.1% over the past 10 years. GuruFocus rated Walmart Stores Inc. the business predictability rank of 5-star.

Added: Aon Corp. (AON)

Steven Romick added to his holdings in Aon Corp. by 10.68%. His purchase prices were between $38.99 and $46.05, with an estimated average price of $41.71. The impact to his portfolio due to this purchase was 0.71%. His holdings were 4,383,000 shares as of 12/31/2010.

Aon Corporation is a holding company whose operating subsidiaries carry onbusiness in three distinct segments: insurance brokerage and other services; consulting; and insurance underwriting. Aon Corp. has a market cap of $17.12 billion; its shares were traded at around $51.89 with a P/E ratio of 16.9 and P/S ratio of 2. The dividend yield of Aon Corp. stocks is 1.1%. Aon Corp. had an annual average earning growth of 2.7% over the past 10 years.

Added: Pfizer Inc. (PFE)

Steven Romick added to his holdings in Pfizer Inc. by 18.75%. His purchase prices were between $16.3 and $17.8, with an estimated average price of $17.16. The impact to his portfolio due to this purchase was 0.52%. His holdings were 5,130,000 shares as of 12/31/2010.

Pfizer Inc is a research-based, global pharmaceutical company that discovers and develops innovative, value-added products that improve the quality of life of people around the world and help them enjoy longer, healthier, and more productive lives. Pfizer Inc. has a market cap of $153.31 billion; its shares were traded at around $19.14 with a P/E ratio of 8.6 and P/S ratio of 2.3. The dividend yield of Pfizer Inc. stocks is 4.2%. Pfizer Inc. had an annual average earning growth of 1.8% over the past 10 years.

Added: Omnicare Inc. (OCR)

Steven Romick added to his holdings in Omnicare Inc. by 14.14%. His purchase prices were between $22.22 and $25.75, with an estimated average price of $23.92. The impact to his portfolio due to this purchase was 0.44%. His holdings were 3,795,000 shares as of 12/31/2010.

Omnicare, Inc., a Fortune five hundred company based in Covington, Kentucky, is a provider of pharmaceutical care for the elderly. Omnicare Inc. has a market cap of $3.38 billion; its shares were traded at around $29.19 with a P/E ratio of 14.2 and P/S ratio of 0.5. The dividend yield of Omnicare Inc. stocks is 0.5%. Omnicare Inc. had an annual average earning growth of 7.8% over the past 10 years.

Added: Total S.a. (TOT)

Steven Romick added to his holdings in Total S.a. by 23.09%. His purchase prices were between $48.77 and $57.65, with an estimated average price of $53.25. The impact to his portfolio due to this purchase was 0.42%. His holdings were 1,130,000 shares as of 12/31/2010.

Total Fina SA engages in worldwide oil and gas production, other upstream, RM&T and an expanding multi-national specialty chemicals business. Total S.a. has a market cap of $133.08 billion; its shares were traded at around $59.55 with a P/E ratio of 9.7 and P/S ratio of 0.6. The dividend yield of Total S.a. stocks is 4.2%. Total S.a. had an annual average earning growth of 13.2% over the past 10 years. GuruFocus rated Total S.a. the business predictability rank of 3-star.

Added: The Travelers Companies Inc. (TRV)

Steven Romick added to his holdings in The Travelers Companies Inc. by 36.36%. His purchase prices were between $52.12 and $57.44, with an estimated average price of $54.95. The impact to his portfolio due to this purchase was 0.25%. His holdings were 465,000 shares as of 12/31/2010.

St. Paul Travelers is a provider of commercial property-liability insurance and asset management services. The Travelers Companies Inc. has a market cap of $27.27 billion; its shares were traded at around $59.22 with a P/E ratio of 9.4 and P/S ratio of 1.1. The dividend yield of The Travelers Companies Inc. stocks is 2.4%. The Travelers Companies Inc. had an annual average earning growth of 8.4% over the past 5 years.

Added: Covidien Plc. (COV)

Steven Romick added to his holdings in Covidien Plc. by 3.61%. His purchase prices were between $39.5 and $46.48, with an estimated average price of $42.47. The impact to his portfolio due to this purchase was 0.23%. His holdings were 3,875,000 shares as of 12/31/2010.

Covidien PLC, formerly Covidien Ltd, is engaged in the development, manufacture and sale of healthcare products for use in clinical and home settings. Covidien Plc. has a market cap of $25.47 billion; its shares were traded at around $51.44 with a P/E ratio of 14.6 and P/S ratio of 2.4. The dividend yield of Covidien Plc. stocks is 1.6%.

Added: Occidental Petroleum Corp. (OXY)

Steven Romick added to his holdings in Occidental Petroleum Corp. by 2.17%. His purchase prices were between $78.63 and $99.03, with an estimated average price of $87.47. The impact to his portfolio due to this purchase was 0.13%. His holdings were 1,645,000 shares as of 12/31/2010.

Occidental Petroleum Corp. explores for, develops, produces and markets crude oil and natural gas and manufactures and markets a variety of basic chemicals, including chlorine, caustic soda, and ethylene dichloride, as well as specialty chemicals and vinyls, including polyvinyl chloride resins and vinyl chloride monomer. Occidental Petroleum Corp. has a market cap of $81.44 billion; its shares were traded at around $100.22 with a P/E ratio of 17.7 and P/S ratio of 4.3. The dividend yield of Occidental Petroleum Corp. stocks is 1.5%. Occidental Petroleum Corp. had an annual average earning growth of 13.6% over the past 10 years.

Added: Ensco Plc (ESV)

Steven Romick added to his holdings in Ensco Plc by 1.38%. His purchase prices were between $43.97 and $53.4, with an estimated average price of $48.77. The impact to his portfolio due to this purchase was 0.11%. His holdings were 4,055,000 shares as of 12/31/2010.

Ensco International plc, formerly ENSCO International Incorporated, is a provider of offshore contract drilling services to the international oil and gas industry. Ensco Plc has a market cap of $7.89 billion; its shares were traded at around $55.34 with a P/E ratio of 14.6 and P/S ratio of 4.6. The dividend yield of Ensco Plc stocks is 1.9%. Ensco Plc had an annual average earning growth of 23.9% over the past 10 years. GuruFocus rated Ensco Plc the business predictability rank of 3.5-star.

Sold Out: Koninkl Phil E Ny Sh (PHG)

Steven Romick sold out his holdings in Koninkl Phil E Ny Sh. His sale prices were between $27.1 and $33.9, with an estimated average price of $30.69.

Koninklijke Philips Electronics N.V. is the parent company of Philips, a widely diversified multinational group of electronic and electrical products, systems and equipment, as well as information technology services. Koninkl Phil E Ny Sh has a market cap of $30.4 billion; its shares were traded at around $32.12 with a P/E ratio of 16 and P/S ratio of 0.9. Koninkl Phil E Ny Sh had an annual average earning growth of 4% over the past 5 years.

Sold Out: Chevron Corp. (CVX)

Steven Romick sold out his holdings in Chevron Corp.. His sale prices were between $80.97 and $91.6, with an estimated average price of $85.09.

Chevron is the fifth-largest integrated energy company in the world. Chevron Corp. has a market cap of $207.08 billion; its shares were traded at around $102.9 with a P/E ratio of 10.9 and P/S ratio of 1. The dividend yield of Chevron Corp. stocks is 2.8%. Chevron Corp. had an annual average earning growth of 13.3% over the past 10 years. GuruFocus rated Chevron Corp. the business predictability rank of 2-star.

Sold Out: Health Net Inc. (HNT)

Steven Romick sold out his holdings in Health Net Inc.. His sale prices were between $25.04 and $29.35, with an estimated average price of $27.11.

Health Net, Inc. is an integrated managed care organization which administers the delivery of managed health care services. Health Net Inc. has a market cap of $2.81 billion; its shares were traded at around $29.39 with a P/E ratio of 11.7 and P/S ratio of 0.2. Health Net Inc. had an annual average earning growth of 5.5% over the past 5 years.

Sold Out: G&k Services Inc. (GKSR)

Steven Romick sold out his holdings in G&k Services Inc.. His sale prices were between $22.09 and $31.69, with an estimated average price of $27.4.

G&K Services, Inc. is a market leader in branded identity apparel programs and facility services in the United States, and is the largest such provider in Canada. G&k Services Inc. has a market cap of $591.6 million; its shares were traded at around $31.65 with a P/E ratio of 22.6 and P/S ratio of 0.7. The dividend yield of G&k Services Inc. stocks is 1.2%.

Sold Out: Lowes Companies Inc. (LOW)

Steven Romick sold out his holdings in Lowes Companies Inc.. His sale prices were between $21.05 and $25.68, with an estimated average price of $23.05.

Lowe's Companies Inc. is a retailer of home improvement products in the world, with specific emphasis on retail do-it-yourself and commercial business customers. Lowes Companies Inc. has a market cap of $35.19 billion; its shares were traded at around $25.5 with a P/E ratio of 17.7 and P/S ratio of 0.7. The dividend yield of Lowes Companies Inc. stocks is 1.7%. Lowes Companies Inc. had an annual average earning growth of 11.8% over the past 10 years.

About the author:

gurufocus
GuruFocus - Stock Picks and Market Insight of Gurus

Rating: 4.3/5 (7 votes)

Comments

Please leave your comment:


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
Email Hide