Steven Romick (Trades, Portfolio), manager of the FPA Crescent Fund, disclosed this week that his fund’s top five trades in the first quarter included a position reduction in Booking Holdings Inc. (BKNG, Financial) and new buys in four companies: International Flavors & Fragrances Inc. (IFF, Financial), Unilever PLC (UL, Financial)(XAMS:UNA, Financial), Entain PLC (LSE:ENT, Financial) and JDE Peets NV (XAMS:JDEP, Financial).
Part of Los Angeles-based First Pacific Advisers, the FPA Crescent Fund seeks value in all parts of a company’s capital structure, including common stock, preferred stock, convertible bonds and corporate bonds. The fund’s portfolio contains long and short equity positions, emphasizing positions in out-of-favor companies that are trading below private market value.
As of June 30, FPA Crescent’s $8.04 billion equity portfolio contains 119 stocks, with 75 new positions and a turnover ratio of 12%. The top four sectors in terms of weight are communication services, financial services, technology and basic materials, representing 27.68%, 23.99%, 16.01% and 10.53% of the equity portfolio.
Booking Holdings
FPA Crescent sold 30,094 shares of Booking Holdings (BKNG, Financial), chopping 44.53% of the holding and 0.97% of the equity portfolio. Shares averaged $2,335.20 during the second quarter; the stock is significantly overvalued based on Thursday’s price-to-GF Value ratio of 2.03.
GuruFocus ranks the Norwalk, Connecticut-based online booking service giant’s profitability 7 out of 10 on the back of profit margins and returns outperforming more than 70% of global competitors despite three-year revenue and earnings growth rates underperforming over 60% of global travel and leisure companies.
Gurus with large holdings in Booking include Dodge & Cox, Pioneer Investments (Trades, Portfolio) and Baillie Gifford (Trades, Portfolio).
International Flavors & Fragrances
The fund purchased 868,051 shares of International Flavors & Fragrances (IFF, Financial), giving the position 1.58% of equity portfolio space. Shares averaged $143.36 during the second quarter; the stock is fairly valued based on Thursday’s price-to-GF Value ratio of 1.04.
GuruFocus ranks the New York-based chemical company’s financial strength 4 out of 10 on several warning signs, which include a weak Altman Z-score of 1.54 and debt ratios underperforming more than 65% of global competitors.
Unilever
The fund purchased 1,451,639 shares of Unilever (XAMS:UNA, Financial), allocating 1.04% of its equity portfolio to the stake. Shares averaged 48.94 euros ($57.65) during the second quarter; the stock is fairly valued based on Thursday’s price-to-GF Value ratio of 0.98.
GuruFocus ranks the U.K.-based personal products and packaged foods manufacturer’s profitability 8 out of 10 on several positive investing signs, which include a high Piotroski F-score of 7 and an operating margin that has increased approximately 6.6% per year on average over the past five years.
Gurus with large holdings in Unilever’s U.S.-based shares (UL, Financial) include Tom Russo (Trades, Portfolio) and Hotchkis & Wiley.
Entain
The fund purchased 3,205,123 shares of Entain (LSE:ENT, Financial), giving the position 0.94% weight in the equity portfolio. Shares averaged 16.71 pounds ($22.96) during the second quarter; the stock is significantly overvalued based on Thursday’s price-to-GF Value ratio of 1.81.
GuruFocus ranks the U.K.-based sports betting and gaming company’s profitability 7 out of 10 on the back of a three-star business predictability rank and profit margins and returns that outperform more than 68% of global competitors.
JDE Peets
The fund purchased 2,203,638 shares of JDE Peets (XAMS:JDEP, Financial), pouring 0.90% of its equity portfolio into the holding. Shares averaged 30.08 euros ($35.41) during the second quarter.
The Amsterdam, Netherlands-based company acquired Peet’s Coffee in December 2019 and staged in May 2020 one of the largest initial public offerings in the European consumer space over the past 15 years. According to GuruFocus, the company’s operating margin outperforms more than 75% of global competitors despite returns and interest coverage ratios underperforming over 70% of global consumer packaged goods companies.
