David Carlson (Trades, Portfolio), portfolio manager of Elfun Trusts, seeks long-term capital appreciation through U.S. securities that have the potential to pay dividends in the future. During the second quarter, the guru closed his position in Qualcomm Inc. (QCOM, Financial) and started three new positions: First Republic Bank (FRC, Financial), Broadcom Ltd. (AVGO, Financial) and AutoZone Inc. (AZO, Financial).
Qualcomm
Carlson sold his 600,000-share stake of Qualcomm for an average price of $55.88 per share. The guru trimmed 1.4% of his portfolio with this transaction.
The San Diego, California-based semiconductor company reported weak earnings for the quarter, including an 11% year-over-year decline in revenue and a 40% year-over-year decline in net income. The sharp declines in revenue and earnings included impacts from ongoing disputes with Apple Inc.’s (AAPL, Financial) contract manufacturers, who “did not fully report and did not pay royalties due on sales of Apple products” according to the earnings report.
Although Qualcomm’s profit margins outperform 90% of global competitors, the company’s operating margin has declined approximately 5% per year over the past five years. Qualcomm’s three-year revenue growth rate of 3.50% outperforms just 54% of global competitors.
First Republic Bank
Carlson invested in 250,000 shares of First Republic Bank, a San Francisco-based bank that primarily serves cities in the Western U.S. The bank’s share price averaged $94.46 during the second quarter.
First Republic, according to CEO Jim Herbert, reported “strong growth of loans, deposits and wealth management assets” during the quarter, driving revenues up 19.9% year over year and net interest income up 20.5% year over year. The bank’s profitability ranks 6 out of 10, with margins outperforming over 62% of competitors.
Broadcom
Carlson added 80,000 shares of Broadcom for an average price of $232.21 per share. The guru increased his portfolio 0.74% with this transaction.
Broadcom’s profitability ranks 8 out of 10, suggesting good growth potential. The company’s three-year revenue growth rate of 51.20% is near a 10-year high and outperforms 97% of global competitors. Broadcom also has a dividend yield near a three-year high of 1.42%.
AutoZone
Carlson added 20,000 shares of AutoZone, a retailer and distributor of automotive replacement parts in the U.S. The company’s share price averaged $651.53 during the quarter.
AutoZone has six positive investing signs, including expanding operating margins and consistent revenue growth. The automotive parts retailer has a GuruFocus business predictability rank of 4.5 stars, which implies strong and predictable earnings growth in the upcoming quarters.
AutoZone’s operating margin is near a 10-year high and outperforms approximately 94% of global competitors. The company’s profitability ranks 9 as the company also has strong returns on assets and Greenblatt ROC.
See also
You can view the latest guru picks by clicking “latest guru picks” underneath the Gurus tab.
GuruFocus added a new feature that allows you to set the price chart as a default line chart, candlestick chart, open-high-low-close chart or a “mountain” chart. You will find this feature in the Technical Indicators section of Interactive Charts.
Disclosure: I do not have positions in the stocks mentioned.
