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FPA Capital's Third Quarter Top Five Stocks

October 19, 2013 | About:
Monica Wolfe

Monica Wolfe

123 followers
First Pacific Advisors Capital Fund and the FPA New Income Fund, reported their third quarter portfolio holdings earlier today. FPA Capital primarily invests in the stocks of smaller companies, and according to his investing philosophy they base their investments on the following criteria: strong balance sheets, free cash flow, an understandable and successful business strategy under capable management and unique business characteristics.

Holding a fairly concentrated portfolio, the fund added one new stock to its holdings. This sets the total portfolio at 27 stocks valued at nearly $800 million. The following five companies represent the fund's top five stocks that hold the highest weighting in the FPA portfolio.

Rosetta Resources (ROSE)

FPA Capital's largest holding is in Rosetta Resources. Here the guru holds on to a total of 1,419,402 shares of the company’s stock which makes up for 9.7% of its total portfolio and 2.32% of the company’s shares outstanding.

During the third quarter the fund made a slight decrease in his holdings by selling 21,900 shares. This transaction represents a -1.52% decrease in his position in the company. The guru sold these shares in the third quarter price range of $42.45 to $54.47, with an estimated average quarterly price of $47.33. From this average price, the price per share has increased an additional 23.1%.

FPA Capital's holding history of Rosetta as of the third quarter:

1381958099205.png

Rosetta is an exploration and production company involved in the acquisition and development of onshore energy resources in the U.S. The company owns producing and non-producing oil and gas properties in proven or prospective basins that are primarily located in South Texas.

Rosetta Resources’ historical revenue and net income:

1381960456264.png

The three largest guru shareholders of Rosetta:

· RS Investment Management: 7,081,517 shares, representing 11.59% of the company’s shares outstanding.

· First Pacific Advisors: 2,960,302 shares, representing 4.84% of the company’s shares outstanding.

· Columbia Wanger: 1,506,100 shares, representing 2.46% of the company’s shares outstanding.

The analysis on Rosetta reports that the price is nearing a 10-year high, its P/S ratio is nearing a 1-year high and it has issued $769 million of debt over the past three years.

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

1381961903147.png

Rosetta Resources has a market cap of $3.56 billion. Its shares are currently trading at around $58.25 with a P/E ratio of 16.90, a P/S ratio of 4.50 and a P/B ratio of 2.80.

Rowan Companies PLC (RDC)

FPA Capital's second largest position goes to Rowan Companies where the guru holds on to a total of 2,065,700 shares. Their position in the company represents 9.5% of the fund's total assets managed and 1.66% of the company’s shares outstanding.

During the third quarter FPA Capital reduced their position -8.48% by selling 191,300 shares of the company’s stock. They sold these shares in the second quarter price range of $33.97 to $38.30, with an estimated average quarterly price of $35.94. Since then the price per share has increased a slight 0.8%.

FPA Capital's historical holding history:

1381958462295.png

Rowan Companies is a provider of international and domestic contract drilling services. The company also owns and operates a manufacturing division that produces equipment for the drilling, mining and timber industries.

Rowan Companies’ historical revenue and net income:

1382022533014.png

The top three guru shareholders of Rowan Companies:

· First Pacific Advisors: 6,679,200 shares, representing 5.38% of the company’s shares outstanding and 2.4% of their total assets managed.

· Columbia Wanger: 2,432,878 shares, representing 1.96% of the company’s shares outstanding and 0.36% of their total portfolio.

· Robert Rodriguez: 2,065,700 shares, representing 1.66% of the company’s shares outstanding and 9.5% of his total portfolio.

The analysis on Rowan Companies reports that the revenue has been in decline for the past five years, the operating margin has been in a 5-year decline and the P/S ratio is nearing a 2-year low.

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

1382026229209.png

Rowan Companies has a market cap of $4.51 billion. Its shares are currently trading at around $36.31 with a P/E ratio of 19.40, a P/S ratio of 3.00 and a P/B ratio of 1.00. The company had an annual average earnings growth of 13.00% over the past ten years.

Arrow Electronics Inc (ARW)

FPA Capital's third largest stock holding is in Arrow Electronics. The guru holds on to a total of 1,515,500 shares of Arrow, representing 1.51% of the company’s shares outstanding and 9.2% of his total portfolio.

During the third quarter they cut their holdings by -28.53%. The guru sold a total of 605,100 shares in the third quarter price range of $39.89 to $48.66, with an estimated average quarterly price of $45.83. The share price has since then increased approximately 6.4%.

FPA’s historical holding history of Arrow Electronics:

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Arrow Electronics is a global provider of products, services and solutions to industrial and commercial users of electronic components and computer products. The company offers products and services such as materials planning, new product design, programming, inventory management and a variety of online supply chain tools.

Arrow Electronics’ historical revenue and net income:

1382029931608.png

The top three guru shareholders of Arrow Electronics:

· First Pacific Advisors: 4,242,000 shares, representing 4.23% of the company’s shares outstanding and 1.8% of their total assets managed.

· Robert Rodriguez: 1,515,500 shares, representing 1.51% of the company’s shares outstanding and 9.2% of his total portfolio.

· Scott Black: 257,635 shares, representing 0.26% of the company’s shares outstanding and 1.2% of his total portfolio.

The analysis on Arrow Electronics reports that the company’s revenue has slowed down over the past year, the price is nearing a 10-year high and it has issued $695.574 million of debt over the past three years.

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

1382030980307.png

Arrow Electronics has a market cap of $4.93 billion. Its shares are currently trading at around $49.17 with a P/E ratio of 11.90, a P/S ratio of 0.25 and a P/B ratio of 1.30.

Avnet Inc (AVT)

FPA Capital’s fourth largest holding is in the company Avnet. The fund holds on to 1,722,400 shares of the company’s stock, representing 1.29% of their shares outstanding and 9.2% of his total portfolio.

During the third quarter FPA cut its position -24% by selling a total of 559,600 shares. They sold shares in the third quarter price range of $33.94 to $41.71, with an estimated average quarterly price of $38.62. Since then the price per share has increased about 8.9%.

FPA’s historical holding history of Avnet:

1381959503981.png

Avnet is an industrial distributor of electronic components, enterprise computer and storage products and embedded subsystems. The company creates a link in the technology supply chain that connects the world's electronic component and computer product manufacturers and software developers with its customer base.

Avnet’s historical revenue and net income:

1382032238399.png

The top three guru shareholders of Avnet:

· First Pacific Advisors: 4,943,742 shares, representing 3.6% of the company’s shares outstanding and 1.8% of its total assets managed.

· Richard Pzena: 3,967,050 shares, representing 2.89% of the company’s shares outstanding and 0.89% of his total portfolio.

· Columbia Wanger: 3,241,000 shares, representing 2.36% of the company’s shares outstanding and 0.48% of their total portfolio.

The analysis on Avnet reports that the company’s revenue has slowed down over the past year, its price is nearing a 10-year high and it has issued $513.415 million of debt.

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

1382032973270.png

Avnet has a market cap of $5.75 billion. Its shares are currently trading at around $41.94 with a P/E ratio of 13.10, a P/S ratio of 0.23 and a P/B ratio of 1.30.

Western Digital Corporation (WDC)

FPA Capital’s fifth largest portfolio holding is in Western Digital. The guru holds on to a total of 791,500 shares of Western Digital stock, representing 0.33% of the company’s shares outstanding and 6.3% of the fund’s total portfolio.

During the third quarter the portfolio managers cut their position -21.62% by selling a total of 218,300 shares. They sold these shares in the third quarter price range of $60.72 to $70.09, with an estimated average quarterly price of $65.31. Since then the price per share has increased an additional 6.1%.

FPA’s holding history of WDC as of the third quarter:

1381959876738.png

Western Digital is an industry developer and manufacturer of storage solutions that enable people to create, manage, experience and preserve digital content. The company designs and makes storage devices and home entertainment products under the HGST, WD and G-Technology brands.

Western Digital’s historical revenue and net income:

1382033332224.png

The top three guru shareholders of Western Digital stock:

· Charles Brandes: 3,730,071 shares, representing 1.57% of the company’s shares outstanding and 2.9% of his total portfolio.

· First Pacific Advisors: 2,315,100 shares, representing 0.98% of the company’s shares outstanding and 1.5% of their total assets managed.

· Robert Rodriguez: 791,500 shares, representing 0.33% of the company’s shares outstanding and 6.3% of his total portfolio.

The analysis on Western Digital reports that the company’s price is near a 10-year high, it has shown predictable revenue and earnings growth and its P/E and P/S ratios are trading near historical highs.

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

1382033370105.png

Western Digital has a market cap of $16.66 billion. Its shares are currently trading at around $70.65 with a P/E ratio of 18.00, a P/S ratio of 1.11 and a P/B ratio of 2.10. The company had an annual average earnings growth of 27.60% over the past ten years.

GuruFocus rated Western Digital the business predictability rank of 3.5-star.

Check out FPA Capital’s complete third quarter portfolio here.

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