Steven Romick (Trades, Portfolio) joined FPA Funds in 1996 and runs the FPA Crescent Fund, which today manages more than $18 billion in assets. During the third quarter, Romick reiterated his conviction in several holdings that have seen prices decline over the past year, including the three below.
The majority of assets are invested in North America at 70%, followed by 26% in Europe. The largest represented sector is technology at 35.8%, followed by 25.7% in financial services and 14% in industrials.
United Technologies Corp. (UTX, Financial)
Romick added to his stake in United Technologies, purchasing 3,342,610 shares for an average price of $97.82 per share. He now holds a total of 5,222,610 shares.
United Technologies provides products and services to the building systems and aerospace industries. The stock is down 17% in the past year and now trades at 14x earnings, or $92.42 per share. GuruFocus rates the company’s business predictability as 4 out of 5 stars based on earnings and revenue growth.
EPS has grown at a consistent pace over time, as shown in the graph below.
During the third quarter, EPS was $1.54, down from $2.04 in the year-ago quarter. United Technologies’ dividend yield is near the five-year high at 2.74%, with a 39% payout ratio.
Romick also added 10,932,342 shares of Alcoa at an average $9.74 per share, as the company’s share price has declined since Q3 2014.
Alcoa manufactures and engineers lightweight metals such as aluminum, titanium and nickel. The stock is down 41% over the past year and trades at 22x earnings. During the third quarter, earnings were 2 cents per share, down from 12 cents in the prior-year quarter.
Alcoa also pulled out of the red in 2014, posting net income of $268 million, up from losses of $2.28 billion in 2013.
The company pays a dividend yield of 1.37%, with a 31% payout ratio.
Oracle Corp. (ORCL, Financial)
Romick also upped the stake in Oracle by purchasing 2,630,570 shares for an average price of $38.44. He now holds a total of 20,521,170 shares.
GuruFocus rates Oracle’s business predictability as 3.5 out of 5 stars. EPS for FY 2015 ended May was $2.21, down from $2.38 the year before. The operating margin has consistently been in the 30% to 40% range for the past 15 years.
Oracle’s dividend yield is near the 10-year high at 1.53%. Its payout ratio is 25%.
General Electric Co. (GE, Financial)
Romick also added 2,415,130 shares to his holding in GE, which he initiated in the first quarter. He purchased the shares for an average price of $25.57 per share. Over the past year, the stock is up 23% and now trades at $30.26.
In the third quarter, GE reported EPS of 25 cents, down from 35 cents in the year-ago quarter. The graph below depicts the company’s annual earnings over time.
The dividend is close to its three-year low at 3.04%, with a very high payout ratio due to low earnings.
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