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James Li
James Li
Articles (1102)  | Author's Website |

Jerome Dodson’s Parnassus Fund Buys 2 Stocks in 4th Quarter

Fund’s top buy is North Face parent, also boosts Microsoft and Alliance Data

January 15, 2020 | About:

The Parnassus Fund, a fund part of Jerome Dodson (Trades, Portfolio)’s Parnassus Investments, disclosed this week that it established two new positions during fourth-quarter 2019: VF Corp. (NYSE:VFC) and Morningstar Inc. (NASDAQ:MORN). The fund also boosted its holdings of Microsoft Corp. (NASDAQ:MSFT) and Alliance Data Systems Corp. (NYSE:ADS).

While he remains as chairman of Parnassus Investments, Dodson has since given the portfolio management roles for the fund to his partners Robert Klaber and Ian Sexsmith. The fund seeks to invest in out-of-favor companies that have wide economic moat, high-quality management teams and strong growth potential. However, the fund avoids companies that engage in the extraction, refining and production of fossil fuels.

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As of quarter-end, the Parnassus Fund’s $965 million equity portfolio contains 37 stocks with a turnover ratio of 9%. The top three sectors in terms of weight are technology, health care and industrials, with weights of 22.99%, 19.58% and 13.26%.

VF Corp.

The fund purchased 245,280 shares of VF Corp., giving the position 2.53% weight in the equity portfolio. Shares averaged $89.78 during the quarter.

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The Greensboro, North Carolina-based company manufactures outdoor and action sports apparel through brands like The North Face, Timberland and Vans. VF Corp. spun off its Jeans and VF Outlet businesses on May 22 into a standalone business under the name Kontoor Brands Inc. (NYSE:KTB).

GuruFocus ranks VF Corp.’s profitability 8 out of 10 on several positive investing signs, which include margins and returns that outperform over 80% of global competitors. The company said in its September quarterly report that gross margins increased 0.90% from the prior-year quarter, primarily driven by a product mix-shift to higher-margin businesses.

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Other gurus with positions in VF Corp. include Pioneer Investments (Trades, Portfolio) and PRIMECAP Management (Trades, Portfolio).

Morningstar

The fund purchased 118,661 shares of Morningstar, giving the position 1.86% weight in the equity portfolio. Shares averaged $153.71 during the quarter.

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The Chicago-based company provides independent research to financial advisors, asset managers and investors. GuruFocus ranks Morningstar’s profitability 9 out of 10 on the heels of consistent revenue and earnings growth, as highlighted by a 4.5-star business predictability rank. Despite this, operating margins have declined over the past five years and are outperforming just over 63% of global competitors.

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Other gurus with holdings in Morningstar include Ron Baron (Trades, Portfolio)’s Baron Funds and Jim Simons (Trades, Portfolio)’ Renaissance Technologies.

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Microsoft

The fund added 73,439 shares of Microsoft, increasing the position 27.94% and the equity portfolio 1.20%. Shares averaged $147.30 during the quarter.

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The Redmond, Washington-based company provides a wide range of software and hardware products, including Windows and Azure. GuruFocus ranks Microsoft’s profitability 10 out of 10 on several positive investing signs, which include a four-star business predictability rank and profit margins that are outperforming over 96% of global competitors.

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Alliance Data

The fund added 125,891 shares of Alliance Data, increasing the position 83.08% and the equity portfolio 1.46%. Shares averaged $110.38 during the quarter.

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The Plano, Texas-based company provides marketing, loyalty program and private-label credit card services. GuruFocus ranks Alliance Data’s profitability 9 out of 10 on several positive investing signs, which include a five-star business predictability rank and a return on equity that outperforms 86.26% of global competitors.

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See also

We are pleased to have Dodson as one of our speakers at our value conference in May. Other speakers include Rhupal Bhansali from John Rogers (Trades, Portfolio)’ Ariel Investments and keynote speaker Matthew McLennan from First Eagle Investment (Trades, Portfolio). Register now for $200 off the regular price.

Disclosure: Long Alliance Data.

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About the author:

James Li
I am an editorial researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

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