During the second quarter, the T Rowe Price Equity Income Fund (Trades, Portfolio) established one new position and divested three others.
Managed by John Linehan, the fund seeks dividend income and long-term capital growth by investing in mostly large-cap companies. The current portfolio is composed of 101 stocks.
The fund purchased nearly 3.7 million shares of Tyson Foods Inc. (TSN, Financial) for an average price of $61.26 per share, giving it 1.08% portfolio space.
The food company has a market cap of $22.1 billion; its shares were trading around $61.67 on Tuesday with a price-earnings (P/E) ratio of 13.01, a price-book (P/B) ratio of 2.26 and a price-sales (P/S) ratio of 0.63.
The Peter Lynch chart below shows the stock is trading below its fair value.
GuruFocus ranked the company’s financial strength 6 of 10 and its profitability and growth 7 of 10. Tyson’s trailing dividend yield is 1.33% and its forward dividend yield is 1.47%. Over the past five years, the company has grown its dividend at a rate of 31.4% per year.
With its purchase, the fund became Tyson’s largest guru shareholder with 1.03% of its outstanding shares. A total of 13 gurus hold the stock.
The fund exited its positions in The Hershey Co. (HSY, Financial), FirstEnergy Corp. (FE, Financial) and Och-Ziff Capital Management Group LLC (OZM, Financial) during the quarter.
Having established the 310,000-share position in Hershey in fourth-quarter 2016, T. Rowe Price sold the position for an average price of $110.41 per share. The trade had an impact of -0.16% on the portfolio.
The confectioner has a market cap of $22.61 billion; its shares were trading around $106.27 per share on Tuesday with a P/E ratio of 57.4, a P/B ratio of 27.2 and a P/S ratio of 3.04.
According to the Peter Lynch chart below, the stock is trading above its fair value.
GuruFocus ranked Hershey’s financial strength 5 of 10 and its profitability and growth 8 of 10. The trailing dividend yield is 2.32%, and the forward dividend yield is 2.34%. The company has grown its dividend by 12% per year over a five-year period.
With 1.86% of outstanding shares, Pioneer Investments (Trades, Portfolio) is the largest shareholder among the gurus.
The fund sold its remaining 875,000 shares of FirstEnergy for an average price of $29.69 per share. The divestment contracted the portfolio by -0.13%. The fund has been reducing the position since first-quarter 2016.
The energy company has a market cap of $13.5 billion; its shares were trading around $30.34 on Tuesday with a forward P/E ratio of 10.6, a P/B ratio of 2.2 and a P/S ratio of 0.92.
Based on the Peter Lynch chart below, the stock appears to be trading above its fair value.
GuruFocus ranked FirstEnergy’s financial strength 3 of 10 and its profitability and growth 4 of 10. The trailing dividend yield is 4.74%, and the forward dividend yield is 4.77%. The company has grown its dividend by -10.3% per year over the past five years.
Jim Simons (Trades, Portfolio) is the company’s largest guru shareholder with 1.4% of outstanding shares. A total of six other gurus also have positions.
The fund sold its 5 million remaining shares of Och-Ziff Capital for an average price of $2.37 per share, impacting the portfolio by -0.05%.
The asset management company has a market cap of $1.4 billion; its shares were trading around $2.99 on Tuesday with a P/S ratio of 1.54.
The Peter Lynch chart below shows the stock is trading slightly above its fair value.
GuruFocus ranked Och-Ziff’s financial strength 3 of 10 and its profitability and growth 1 of 10. The trailing dividend yield is 1%, and the forward dividend yield is 0.99%. The company has not grown its dividend in the past five years.
David Abrams (Trades, Portfolio) holds the largest stake in the company with 4.9% of its outstanding shares. Five other gurus own the stock.
The fund also added to its holdings of Southern Co. (SO, Financial), Fifth Third Bancorp (FITB, Financial) and Gilead Sciences (GILD, Financial), among others, during the quarter. Among positions it reduced were Royal Dutch Shell PLC (RDS.A, Financial), The AES Corp. (AES, Financial) and Boeing Co. (BA, Financial).
Disclosure: I do not own any stocks mentioned in the article.
