Investor Jerome Dodson (Trades, Portfolio) of the Parnassus Fund gained three new holdings and sold out three holdings during the second quarter.
Dodson’s new holdings are with Patterson Companies Inc. (PDCO, Financial), CVS Health Corp. (CVS, Financial) and Praxair Inc. (PX, Financial). CVS and Praxair are in his top 10 holdings as of the second quarter.
Dodson purchased 440,000 shares in Patterson at an average price of $46 per share. Patterson, a medical distribution company, has a market cap of $4.9 billion with an enterprise value of $5.8 billion. It has a P/E of 25.7 and a forward P/E of 17.3. It has a P/B of 3.4 and a P/S of 0.9. GuruFocus rates their financial strength 6 of 10 and their profitability and growth 7 of 10. The transaction had a 3.08% impact on Dodson’s portfolio.
Dodson purchased 234,000 shares in CVS at an average price of $99 per share. The health company has a market cap of $104.2 billion with an enterprise value of $129.8 billion. It has a P/E of 21.06 and a forward P/E of 16.72. It has a P/B of 2.9 and a P/S of 0.68. GuruFocus rated its financial strength 6 of 10 and its profitability and growth 8 of 10. The deal had a 3.28% impact on his portfolio.
Dodson purchased 200,000 shares in Praxair at an average price of $113 per share. Praxair is the largest industrial gases company in the Americas and third largest in the world by revenue. It has a market cap of $33.7 billion with an enterprise value of $43.3 billion. It has a P/E of 22.8 and a forward P/E of 21. It has a P/B of 6.9 and a P/S of 3.2. GuruFocus rated its financial strength 5 of 10 and its profitability and growth 8 of 10. The buy had a 3.3% impact on his portfolio.
Additional top buys for the second quarter were Pentair Plc (PNR), Micron Technology (MU), eBay Inc. (EBAY), FedEx (FDX), Perrigo (PRGO), Mondelez International (MDLZ), Allergan Plc (AGN) and Wells Fargo (WFC).
Dodson is worth $684 million and holds stock in 37 companies. He founded Parnassus Investments in 1984. From 2013 through 2015, the Parnassus Fund received a three-year cumulative return of 54.3%, with an excess gain of 2% over the same time frame.
Dodson has said his fund’s investment philosophy is to invest in stocks that are out of favor.
“If you buy the stocks right at the peak or when everyone likes them, there is not as much chance for capital appreciation,” Dodson said.
At the same time, they look for quality management, good returns on equity and the amount of debt a company has accrued. The Parnassus Fund additionally seeks companies with good “ESG factors” (environmental, social and governance factors). Technology stocks are favorable with Dodson because they not only grow faster than other companies, but also tend to have better working environments. The fund tends to avoid companies involved in the exploration, extraction, production, manufacturing or refining of fossil fuels.
During the second quarter, Dodson sold out of SanDisk Corp. (SNDK, Financial), Cummins Inc. (CMI, Financial) and Plantronics Inc. (PLT, Financial). Coincidentally, all three of these companies were new holdings for him in the fourth quarter of 2015.
He sold 375,000 SanDisk shares at the average price of $76 per share; he originally bought 450,000 shares at an average price of $73. The remainder was sold during the previous quarter. SanDisk, a manufacturer of flash memory storage devices has a market cap of $15.5 billion with an enterprise value of $13 billion. It has a P/E of 37.2 and a forward P/E of 21. Its P/B is 2.9 and its P/S is 2.8. GuruFocus ranked its financial strength 7 of 10 and its profitability and growth 6 of 10. The transaction had a -3.9% impact on his portfolio.
The Cummins shares sold for an average price of $113 per share. He sold 200,000 shares of his initial 325,000 during the second quarter. He sold the remaining 125,000 during the previous quarter. Cummins, a company that designs, manufactures and distributes engines, filtration and power generation products, has a market cap of $20.3 billion with an enterprise value of $21.3 billion. It has a P/E of 15.6 and a forward P/E of 14.8. Its P/B is 2.9 and its P/S is 1.12. GuruFocus ranked its financial strength 7 of 10 and its profitability and growth 7 of 10. Dodson’s portfolio was impacted by -3% with this sale.
Of the initial 175,000 shares Dodson bought in Plantronics, he sold all for the average price of $42. The electronics company has a market cap of $1.6 billion with an enterprise value of $1.7 billion. It has a P/E of 24 and a forward P/E of 15. Its P/B is 5 and its P/S is 1.9. GuruFocus ranked its financial strength 6 of 10 and its profitability and growth 6 of 10. The sale had a -0.9% impact on his portfolio.
Dodson’s top sales in the second quarter include Air Lease Corp. (AL), Trimble Navigation (TRMB) Whole Foods (WFM), Deere & Co. (DE), Charles Schwab Corp. (SCHW), Applied Materials (AMAT), McKesson Corp. (MCK), American Express (AXP), Gilead Sciences (GILD) and Intel (INTC).
Disclosure: I do not own stock in any company mentioned in this article.
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