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Steven Romick of the FPA Crescent Fund’s Top Five Stocks

October 17, 2013 | About:
Monica Wolfe

Monica Wolfe

127 followers
Steven Romick is the portfolio manager of First Pacific Advisors Crescent Fund. The fund’s investment objective and strategy reports that they “seek to generate equity-like returns over the long-term, take less risk than the market and avoid permanent impairment of capital.”

Over the third quarter Romick kept pretty quiet, buying no new stocks and selling out of three. The guru’s portfolio currently holds 53 stocks valued at over $6.9 billion. The following five companies represent Romick’s top five stock holdings as of the close of the third quarter.



Microsoft (MSFT)

Romick’s largest position this quarter is in Microsoft. The guru holds on to 15,013,700 shares of the company’s stock, representing 7.2% of his total portfolio and 0.18% of the company’s shares outstanding.

Romick also made a notable increase in the company’s stock over the past quarter. He increased his position 28.16% by purchasing a total of 3,298,700 shares of Microsoft. He bought these in the third quarter price range of $31.15 to $36.27, with an estimated average quarterly price of $32.90 per share, and since then the share price has increased approximately 5.4%.

Romick has held Microsoft since 2010Q3 and has seen average gains of 23%. Steven Romick’s holding history as of the third quarter:

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Microsoft generates revenue by developing, manufacturing, licensing and supporting a wide range of software products and services for many different types of computing devices.

Microsoft’s historical revenue and net income:

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The company recently declared a dividend of $0.28 per share. This dividend represents an increase of $0.05 per share or a 22% increase from its previous dividend.

The current top three guru shareholders of Microsoft:

· Dodge & Cox: 77,260,349 shares, representing 0.93% of the company’s shares outstanding and 3.2% of their total portfolio.

· PRIMECAP Management: 63,165,491 shares, representing 0.76% of the company’s shares outstanding and 3.1% of its total assets managed.

· Jeff Ubben: 57,750,000 shares, representing 0.69% of the company’s shares outstanding and 20.5% of his total portfolio.

The analysis on Microsoft reports that the price is near a 10-year high, its interest coverage is comfortable and it has shown predictable revenue and earnings growth.

The Peter Lynch Chart suggests that the company is currently undervalued:

1382037766652.png

Microsoft has a market cap of $288.36. Its shares are currently trading at around $34.49 with a P/E ratio of 13.50, a P/S ratio of 3.70 and a P/B ratio of 3.60. The company had an annual average earnings growth of 14.40% over the past ten years.

GuruFocus rated Microsoft the business predictability rank of 3-star.

Aon PLC (AON)

Romick’s second largest stock holding goes to Aon PLC where he holds 6,249,200 shares. His position in the company represents 6.7% of his total portfolio and 2.03% of the company’s shares outstanding. Romick did not make any changes to his position in Aon over the past quarter.

Romick’s historical holding history:

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Aon provides risk management & human capital consulting services, delivering distinctive client value via risk management solutions, including insurance & reinsurance brokerage and workforce productivity solutions.

Aon’s historical revenue and net income:

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The top three guru shareholders of Aon PLC:

· Mason Hawkins: 18,901,702 shares, representing 6.15% of the company’s shares outstanding and 6% of his total portfolio.

· Meryl Witmer: 15,742,331 shares, representing 5.12% of the company’s shares outstanding and 5.4% of her total portfolio.

· First Pacific Advisors: 6,887,700 shares, representing 2.24% of the company’s shares outstanding and 4.7% of their total assets managed.

The analysis on Aon reports that the price is near a 10-year high, its operating margin is expanding and its P/E, P/S and P/B ratios are all trading near historical highs. The company has also issued $2 billion of debt over the past three years, but its debt level has been deemed acceptable.

The Peter Lynch Chart suggests that the company is currently overvalued:

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Aon PLC has a market cap of $22.75 billion. Its shares are currently trading at around $73.99 with a P/E ratio of 23.60, a P/S ratio of 2.00 and a P/B ratio of 3.00. The company had an annual average earnings growth of 32.60% over the past ten years.

CVS Caremark Corp (CVS)

Romick’s third largest position is in CVS Caremark where the guru maintains a total of 6,805,000 shares of the company’s stock. His position makes up for 5.6% of his total portfolio and 0.55% of the company’s shares outstanding.

Steven Romick hasn’t altered his position in CVS since 2012Q4.

Romick’s historical holding history of CVS:

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CVS Caremark provides pharmacy healthcare services in the U.S. It has three reportable business segments: Pharmacy Services, Retail Pharmacy and Corporate.

CVS Caremark’s historical revenue and net income:

CVS's revenue growth has recently beaten the industry average of 2.5%. Since last year, the company’s revenues have increased by 1.7%. CVS improved its earnings per share by 21.3% in the most recent quarter compared to the same quarter last year.

The top three guru shareholders of CVS:

· Chris Davis: 38,896,601 shares, representing 3.17% of the company’s shares outstanding and 5.6% of his total portfolio.

· First Pacific Advisors: 7,357,900 shares, representing 0.6% of the company’s shares outstanding and 4.5% of their total portfolio.

· Steven Romick: 6,805,000 shares, representing 0.55% of the company’s shares outstanding and 5.6% of his total portfolio.

The Peter Lynch Chart suggests that the company is currently overvalued:

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CVS has a market cap of $73.7 billion. Its shares are currently trading at around $60.00 with a P/E ratio of 17.80, a P/S ratio of 0.60 and a P/B ratio of 1.90. The company had an annual average earnings growth of 13.30% over the past ten years.

GuruFocus rated CVS the business predictability rank of 4-star.

Oracle Corporation (ORCL)

Romick’s fourth largest holding is in Oracle Corporation. The guru holds on to 10,575,000 shares of the company’s stock, representing 5.1% of his total portfolio and 0.23% of the company’s shares outstanding.

During the third quarter Romick upped his stake 19.76% by purchasing a total of 1,745,000 shares. He bought these shares in the Q3 price range of $30.10 to $34.05, with an estimated average quarterly price of $32.44 per share. Since then the price per share has increased approximately 1.8%.

Romick’s holding history as of the third quarter:

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Oracle is a provider of enterprise software and a provider of computer hardware products and services. The Company provides technologies of cloud computing, including database and middleware as well as web-based applications.

Oracle’s historical revenue and net income:

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The top three guru shareholders of Oracle:

· Jeremy Grantham: 49,839,220 shares, representing 1.08% of the company’s shares outstanding and 4% of his total portfolio.

· Meryl Witmer: 37,704,501 shares, representing 0.81% of the company’s shares outstanding and 6.2% of her total portfolio.

· PRIMECAP Management: 24,270,386 shares, representing 0.52% of the company’s shares outstanding and 1.1% of their total portfolio.

The analysis on Oracle reports that the revenue has slowed down over the past year, the operating margin is expanding, their dividend yield is at a 5-year high and their price is near a 10-year high.

The Peter Lynch Chart suggests that the company is currently undervalued:

1382040024477.png

Oracle Corporation has a market cap of $149.44 billion. Its shares are currently trading at around $32.79 with a P/E ratio of 14.10, a P/S ratio of 4.20 and a P/B ratio of 3.50. The company had an annual average earnings growth of 19.90% over the past ten years.

GuruFocus rated Oracle the business predictability rank of 5-star.

Occidental Petroleum Corporation (OXY)

The guru’s fifth largest holding is in Occidental Petroleum Corp. Romick holds on to 3,616,500 shares of Occidental stock, representing 4.9% of his total portfolio and 0.45% of the company’s shares outstanding.

Romick made his largest increase of the quarter in Occidental Petroleum. The guru upped his stake 35.66% by purchasing 950,600 shares of the company’s stock. He purchased these shares in the third quarter price range of $85.38 to $94.46, with an estimated average quarterly price of $89.71. Since then the price per share is up about 8%.

Romick’s historical holding history:

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Occidental Petroleum conducts its operations through various oil and gas, chemical, midstream, marketing and other subsidiaries and affiliates. Its businesses consist of three segments: oil and gas, chemical and midstream and marketing.

Occidental Petroleum’s historical revenue and net income:

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The top three guru shareholders of Occidental Petroleum:

· James Barrow: 16,302,226 shares, representing 2.02% of the company’s shares outstanding and 2.4% of his total portfolio.

· Chris Davis: 7,226,766 shares, representing 0.9% of the company’s shares outstanding and 1.6% of his total portfolio.

· Steven Romick: 3,616,500 shares, representing 0.45% of the company’s shares outstanding and 4.9% of his total assets managed.

The analysis on Occidental reports that the revenue has slowed down over the past year and that the company’s price is nearing a 2-year high.

The Peter Lynch Chart suggests that the company is currently overvalued:

1382040369124.png

Occidental Petroleum has a market cap of $78.5 billion. Its shares are currently trading at around $97.42 with a P/E ratio of 17.90, a P/S ratio of 3.20 and a P/B ratio of 1.90. The company had an annual average earnings growth of 10% over the past ten years.

Check out Steven Romick’s complete third quarter portfolio here.

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