David Rolfe

Wedgewood Partners, Inc.

Last Update: 2013-05-16

Number of Stocks: 22
Number of New Stocks: 0

Total Value: $2,918 Mil
Q/Q Turnover: 22%

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David Rolfe's Profile & Performance

Profile

David Rolfe has been managing Wedgewood's portfolio for 18 years. He studied at University of Missouri and received a degree of B.S.B.A. in Finance/Economics in 1984.

Web Page:http://wedgewoodpartners.com/

Investing Philosophy

Wedgewood's underlying equity investment philosophy is predicated on a strong belief that significant long-term wealth will be created by investing as "owners" in companies. In our "Invest as Business Owners" approach, we seek companies that the following characteristics:

1. A dominant product or service that is practically irreplaceable or lacks substitutes.
2. A sustainable and consistent level of growing revenues, earnings and dividends.
3. A high level of profitability, measured by return on equity without the use of excessive debt.
4. A strong management team that is shareholder oriented.

This is the flow chart of their process:

Total Holding History

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Performance of Wedgewood Partners

Year	Return (%)	S&P500 (%)	Excess Gain (%)
2012	22.54	15.4	7.1
2011	5.61	2.08	3.5
2010	14.5	15.06	-0.6
3-Year Cumulative	48.2 (14%/year)	35.5 (10.7%/year)	12.7 (3.3%/year)
2009	60.83	26.46	34.4
2008	-38.12	-37	-1.1
5-Year Cumulative	47.5 (8.1%/year)	8 (1.5%/year)	39.5 (6.6%/year)
2007	15.04	5.61	9.4
2006	-2.77	15.79	-18.6
2005	5.84	4.91	0.9
2004	9.61	12	-2.4
2003	42.25	28.7	13.5
10-Year Cumulative	172.2 (10.5%/year)	99.7 (7.2%/year)	72.5 (3.3%/year)
2002	-20.42	-22.1	1.7
2001	-7.72	-11.9	4.2
2000	-10.31	-9.1	-1.2
1999	56.99	21	36.0
1998	49.6	28.6	21.0
15-Year Cumulative	321.1 (10.1%/year)	93.8 (4.5%/year)	227.3 (5.6%/year)
1997	21.1	33.4	-12.3
1996	23.57	23	0.6
1995	42.59	37.6	5.0
1994	3.78	1.3	2.5
1993	-6.21	10.1	-16.3
20-Year Cumulative	774.5 (11.5%/year)	388.1 (8.2%/year)	386.4 (3.3%/year)

Commentaries and Stories

Currently 4.95/5

Rating: 4.9/5 (19 votes)

GuruFocus Interview with Wedgewood's David Rolfe at the Omaha Value Investing Conference

May 9, 2013

Currently 5.00/5

Rating: 5.0/5 (20 votes)

GEICO - The “Growth Company” That Made the “Value Investing” Careers of Both Benjamin Graham and Warren Buffett (Wedgewood VIC Presentation)

May 6, 2013

David Rolfe - GEICO - The “Growth Company” That Made The “Value Investing” Careers Of Both Benjamin Graham And Warren Buffett (Wedgewood VIC Presentation)

"In 1948, we made our GEICO investment and from then on, we seemed to be very brilliant people." More...

Currently 5.00/5

Rating: 5.0/5 (1 vote)

Wedgewood Partners Comments on Perrigo

April 10, 2013

Our clients have owned Perrigo (PGO) since August of 2010. You, dear reader, have likely been a customer of Perrigo's products for years – maybe decades -‐ and may not even realize it. Perrigo is a 125 year-‐old company that pioneered the concept of store branded OTC pharmaceuticals. If you have ever gone to you local grocery store, maybe into your local Wal-‐Mart store or even one of the national pharmacy chains such as Walgreens or CVS to purchase, say, a bottle of Motrin or a bottle of NyQuil and opted instead to purchase the store brand equivalent – that is Perrigo. More...

Currently 4.50/5

Rating: 4.5/5 (2 votes)

Wedgewood Partners Comments on Express Scripts

April 10, 2013

Although we have been investors in Express Scripts Holding Company (Express Scripts) (ESRX) since 2007, it was not always a "holding company." Express Scripts is the largest pharmacy benefits manager (PBM) in the country, managing nearly one third of all prescriptions written in the U.S. The Company recently (second quarter of 2012) rose to this market position after successfully closing the acquisition of Medco Health Solutions (Medco), effectively doubling the volume of prescriptions previously handled. Express Scripts' primary value proposition is to drive lower absolute and relative drug spend by injecting itself into almost every step of a clients' drug prescription process -‐ from patient evaluation and distribution channels, to adherence. The Company's unparalleled scale and unique focus on the behavioral and clinical aspects of the drug prescription process enables them to effectively deliver an "open architecture" drug benefit which maximizes the opportunity for clients to eliminate spending waste. The Company's clients include managed care organizations, health insurers; mid-‐to-‐large employers and unions, all of whom are constantly bombarded by double-‐digit More...

Currently 3.33/5

Rating: 3.3/5 (3 votes)

Wedgewood Partners Comments on Coach

April 10, 2013

Despite Coach (COH)'s weak revenue results reported for the holiday quarter, the Company managed to maintain its core profitability profile, which we think is a particularly rare attribute in retailing, and is a testament to the strength of the Coach brand. As more apparel-‐focused retailers enter the handbag market, Coach is countering by expanding into more "lifestyle" based products, including ready-‐to-‐ wear, footwear, fragrance and watches (to name a few). While much of consensus is concerned that the Company's profitability will be hampered by these new categories, we think the bulk of any incremental costs, particularly distribution, are already "sunk" in the Coach-‐owned and operated, world-‐wide distribution footprint -‐ which includes over 900 branded full-‐price stores and outlets. In fact, almost 90% of Coach's sales are derived from its stores and website, so we believe that allocating incremental store space to lifestyle will require minimal incremental investment. For instance, the Company can give employees portable point-‐of-‐sales units and convert checkout counter space into product floor space. This is in stark contrast to branded More...

Currently 4.00/5

Rating: 4.0/5 (1 vote)

Wedgewood Partners Comments on Monster Beverage

April 10, 2013

Monster Beverage (HNA) drove 15% revenue growth during the fourth quarter as the Company continued to leverage its high-‐profile brand by aggressively tapping into international markets while expanding into adjacent categories within the domestic alternative beverage market. The Company is the leading U.S. energy drink marketer (in terms of units sold), but they are quickly expanding into the protein drinks and tea-‐based sub-‐categories of the alternative beverage segment, rapidly multiplying Monster's total addressable market. The domestic alternative beverage segment opportunity is over $34 billion and we estimate it is roughly the same for international. So while Monster maintains leadership in the domestic energy drink category, the Company still has a low, single-‐digit share of its total potential markets, and although headline risk for the energy drink category continues, demand for energy drink products continues to take market share from the traditional carbonated soft drink category. As a result, we continue to be very optimistic about Monster's long-‐term growth potential. During the quarter, the stock did More...

Currently 5.00/5

Rating: 5.0/5 (3 votes)

Wedgewood Partners' First Quarter 2013 Investor Letter

April 10, 2013

The good news for the stock market during the first quarter was the gain in the Standard & Poor's 500 Index of +10.6%. The gain in the Dow Jones Industrial Average of 11.9% was the best start of a calendar year for the DJIA since 1987. The bad news is…our net-‐of-‐fee Composite gains of just +5.8% lagged materially behind the S&P 500 Index, as well as our benchmark the Russell 1000 Growth Index -‐ which gained +9.5%. The leading stocks thus far in 2013 are an eclectic mix of cyclical companies, consumer discretionary companies and significantly, high dividend paying consumer staple, utility and healthcare companies. (As of quarter-‐end, we had 0% weighting in consumer staples, 0% in utilities and 20% in healthcare.) More...

Currently 5.00/5

Rating: 5.0/5 (1 vote)

David Rolfe of Wedgewood Partners Comments on National Oilwell Varco

January 29, 2013

When it comes to the global oil service business National Oilwell Varco (NOV) is truly a jack-of-all-trades. Over the many decades the Company has been uniquely successful through countless mergers and acquisitions by both vertically and horizontally integrating their plethora of products and services. Indeed, the Company has been so successful in offering a global one-stop-shop that their well-known industry sobriquet is "No Other Vender." The Company traces its roots to its founding in antebellum Houston in 1841. The Company's two main predecessors, Oilwell Supply and National Supply were founded in 1862 and 1893, respectively. Varco took its formal name in 1915 from three key partners – Edgar Vuilleumiere, Walter Abegg and Baldwin Reinhold. Fastforwarding into the 20th century finds Oilwell Supply acquired by U.S. Steel in 1930 and in 1958 Armco Steel merged with National Supply. In 1987, National Supply merged with USS Oilwell to become National Oilwell. The Company finally took its current name and form when in 2005 National Oilwell and Varco merged to become National Oilwell Varco. More...

Currently 0.00/5

Rating: 0.0/5 (0 votes)

David Rolfe of Wedgewood Partners Comments on Monster Beverage Corp

January 29, 2013

We also added Monster Beverage Corp. (MNST) to the Fund during the quarter. For over 20 years, prior to a name change in January 2012, the Company was known as Hansen Natural Corp, with roots tracing back to the 1930's. Currently, Monster Beverage primarily manufactures beverages that compete in the alternative beverage industry, with a particular focus on the energy drink category. More...

Currently 0.00/5

Rating: 0.0/5 (0 votes)

David Rolfe of Wedgewood Partners Comments on Priceline.com

January 29, 2013

Priceline.com (PCLN) was added to the Fund during the 4th quarter and after a multi-month decline from the stock's all-time high. Priceline.com is an online travel agency made up of a several of online properties such as TravelJigsaw, Agoda and, of course, Priceline.com, but generates the vast majority of its profitability from its internationallyfocused, hotel booking site, Booking.com. We think that Priceline.com has been able to generate superior ROIC, relative to its peer group, because of its rapidly increasing scale in the international hotel industry, which is a highly fragmented market. Rather than face the daunting task of advertising across several different languages, cultural preferences and mediums, over 200,000 of these international hotels have turned to Booking.com to list inventory. More...

Currently 4.00/5

Rating: 4.0/5 (1 vote)

David Rolfe of Wedgewood Partners Comments on Charles Schwab

January 29, 2013

We think Charles Schwab (SCHW) continues to exhibit a low cost advantage relative to competitors in the financial services industry, with non-interest expenses as a percentage of total client assets of 0.19%, as of the first three quarters of 2012, according to management. This has led to pre-tax profit margins in excess of 30%, which is a multiple of some of the most well established wealth management platforms in the world. We think that this abnormally low expense rate emanates from Schwab's focus on leveraging its information technology infrastructure. In contrast, we think too many of Schwab's rivals rely on more expensive and less efficient human capital to gather assets. The stock continues to trade at a historically low price to book ratio, though that is somewhat offset by a higher forward price to earnings ratio. We think both valuation metrics are somewhat misleading in this historically low interest rate environment and in the event of a rising interest rates, the Company's earnings would likely expand at a very rapid rate, primarily due to money market fund fee waiver relief. So we continue to believe Charles Schwab represents an excellent balance between business quality More...

Currently 5.00/5

Rating: 5.0/5 (5 votes)

David Rolfe Wedgewood Partners Fourth Quarter Letter to Investors

January 29, 2013

Review and Outlook During the 4th quarter of 2012, our Composite declined -.01%. We (barely) outperformed our benchmark, the Russell 1000 Growth Index (-1.32%), as well as the Standard & Poor's 500 Index (-.38%). For the year, we are quite pleased to report that our Composite gain of +21.6% outperformed both the Russell 1000 Growth Index (+15.3%) and the Standard & Poor's 500 Index (+16.0%). More...

Currently 3.25/5

Rating: 3.3/5 (12 votes)

Ask Wedgewood Partners' David Rolfe Your Investing Question for GuruFocus Reader Q&A

November 12, 2012

Currently 2.00/5

Rating: 2.0/5 (2 votes)

Wedgewood Partners' David Rolfe Comments on Varian Medical Systems

November 12, 2012

Varian Medical Systems (VAR) also detracted from performance during the quarter. During the quarter, the Centers for Medicare and Medicaid Services (CMS) proposed to reduce reimbursement rates for radiation therapy in freestanding clinics by more than what investors were expecting. The freestanding clinic market represents about 15% of Varian’s US Oncology revenues and about 5% of the Company’s total revenues. Interestingly, hospital radiation therapy reimbursement rates were proposed higher, despite its identical value proposition. We think that, similar to 2009, the ultimate rate cut will be much lower and clinics will have much more certainty about future reimbursement, which should boost the currently depressed demand for Varian Oncology products in the US. More...

Currently 2.00/5

Rating: 2.0/5 (3 votes)

Wedgewood Partners' David Rolfe Comments on Verisk Analytics

November 12, 2012

Verisk Analytics (VRSK) detracted from our performance during the quarter. While little known to investors even today, Verisk has a long and rich history dating back to its incarnation in 1971. Prior to Verisk’s IPO, it was discreetly called Insurance Services Office (ISO) and began as a nonprofit association for U.S. property and casualty insurance companies. Such insurance companies are regulated by the states and these regulations were quite burdensome and required significant data and documentation. Yet from state to state, insurance companies’ regulatory filings became a duplicitous task. This is where ISO stepped in to become a central – and quite critical - depository and gatherer of data for the association of insurance companies. Over the course of the next 25 years ISO would morph into a private for-profit company, leveraging their access to reams of valuable data and then in turn creating even more valuable analytical products and services. They branched into actuarial loss estimation, standardized policies and proprietary risk classification. In late 2009, the association of insurance companies desired, and needed, the considerable liquidity embedded in their joint More...

Currently 5.00/5

Rating: 5.0/5 (1 vote)

Wedgewood Partners' David Rolfe Comments on Expeditors International of Washington

November 12, 2012

Expeditors International of Washington Inc. (EXPD) detracted from performance during the quarter. Expeditors continues to exhibit a best-in-class return on invested capital relative to its domestic and international third-party logistics rivals and suppliers due, in part, to Expeditors’ lean capital base as well as its highly integrated network of agents in 60 countries around the globe. Not only does Expeditors negotiate shipping rates and consolidate customer freight for forwarding, but they also perform the extremely important function of customs broker for around 75% of their customers, by our estimates. To paraphrase a popular saying in the logistics industry, “you date your forwarder but you marry your customs broker.” In other words, freight forwarding and consolidation is a commodity, where rivals compete on price. It is the customs brokerage functions that add the most value for Expeditors’ clients, particularly for smaller to mid-size businesses that do not possess the scale or expertise necessary for worldwide distribution. These clients tend to be stickier than non-custom brokerage clients. However small and mid-sized businesses have been disproportionately affected More...

Currently 5.00/5

Rating: 5.0/5 (2 votes)

Wedgewood Partners' David Rolfe Comments on Gilead Sciences

November 12, 2012

Gilead Sciences (GILD) was among our top performers during the third quarter. We believe that the stock's strong performance over the past three months, as well as the past year is quite warranted, as the company is on the cutting edge in developing a cure for the hepatitis C virus (HCV). The Company’s journey down this path began last November with their $11 billion purchase of Pharmasset, Inc. Pharmasset’s flagship drug candidate (PSI-7977, now GS-7977) is undergoing trials indicated for all-oral treatment of HCV and if ultimately approved by the FDA, Gilead could possess a multi-year, multi-billion dollar revenue opportunity. We believe that the market, more recently, has better recognized this opportunity, so we trimmed our positions during the quarter. More...

Currently 4.00/5

Rating: 4.0/5 (3 votes)

Wedgewood Partners' David Rolfe Comments on Google

November 12, 2012

Google (GOOG) contributed to the portfolio’s relative outperformance, after the stock appreciated 30% during the Quarter. We believe this was a relief rally, as much as it was the stock catching up to the Company’s torrid growth from the past few years. Much of the relief had to do with Google’s strategy for newly acquired Motorola Mobility. While the Company has been light on specifics, rumors emerged that Google would sell the commodity feature-phone and set-top box units of Motorola by year-end, in order to focus exclusively on Android smartphones. We think a more focused Motorola is a good strategy that could drive increased adoption of Android-based smartphones, which ultimately drives Google’s rapidly growing mobile advertising business. As the stock’s forward price to earnings multiple expanded back to double-digits, we trimmed positions. The Company’s competitive edge is still very robust and we continue to think the stock is cheap, especially relative to its potential growth rate. More...

Currently 3.20/5

Rating: 3.2/5 (5 votes)

David Rolfe's Wedgewood Partners Comments on Coach

November 12, 2012

Currently 3.50/5

Rating: 3.5/5 (4 votes)

Wedgewood Partners Third Quarter 2012 Review and Outlook

November 12, 2012

Philosophy and Process: For the past 20 years, Wedgewood Partners has adhered to an investment philosophy that hinges on thinking and acting like business owners. To paraphrase Warren Buffett; "…being an investor has made me a better owner - and being an owner has made me a better investor." The four members of the Wedgewood Partners’ Investment Committee hold the entire equity stake of Wedgewood, so similar to Buffett, the business owner-approach is pervasive at Wedgewood. As such, we are not concerned about short-term fluctuations in the market price of our businesses, nor are we interested in using these fluctuations to measure or characterize risk. Instead, we view risk as a permanent loss on an investment and we view reward as the long-term appreciation of equity, relative to the underlying growth of the business. We recognize that the byproduct of this successful execution is a concomitant increase in equity value which, prima facie, reduces the risk that we will experience a permanent loss of capital (the ultimate bane of any investment strategy). Said another way, we believe the philosophy of the business More...