The T Rowe Price Equity Income Fund (Trades, Portfolio) disclosed its fourth-quarter 2019 portfolio earlier this week, listing one new holding.
Managed by Brian Linehan, the fund, which is part of Baltimore-based asset management firm T. Rowe Price, seeks to achieve high levels of dividend income and long-term capital growth by investing in stocks that are undervalued or have a strong track record of paying dividends.
Based on these criteria, the fund established a position in CenterPoint Energy Inc. (CNP, Financial) during the quarter.
CenterPoint Energy
Having previously exited a holding in CenterPoint in the third quarter of 2011, the Equity Income Fund invested in 3.45 million shares, allocating 0.47% of the equity portfolio to the stake. The stock traded for an average price of $27.10 per share during the quarter.
The Houston-based utility company has a $13.56 billion market cap; its shares were trading around $27 on Thursday with a price-earnings ratio of 21.43, a price-book ratio of 2.05 and a price-sales ratio of 1.12.
The Peter Lynch chart shows the stock is trading above its fair value, suggesting it is overpriced.
GuruFocus rated CenterPoint’s financial strength 3 out of 10. As a result of issuing approximately $4 billion in new long-term debt over the past three years, it has poor interest coverage. In addition, the low Altman Z-Score of 0.82 warns the company is under financial stress and could be at risk of going bankrupt.
The company’s profitability fared a bit better, scoring a 6 out of 10 rating despite having declining margins and returns that underperform at least half of its competitors. CenterPoint also has a moderate Piotroski F-Score of 4, which indicates operations are stable, a high dividend yield of 4.26% and a business predictability rank of one out of five stars. According to GuruFocus, companies with this rank typically see their stocks gain an average of 1.1% per annum over a 10-year period.
Of the gurus invested in CenterPoint Energy, Jim Simons (Trades, Portfolio)’ Renaissance Technologies has the largest stake with 0.99% of outstanding shares. Other top shareholders are NWQ Managers (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Ray Dalio (Trades, Portfolio) and Mairs and Power (Trades, Portfolio).
Additional trades and portfolio composition
The positions T. Rowe Price added to during the quarter included Equitable Holdings Inc. (EQH, Financial), AbbVie Inc. (ABBV, Financial), Chubb Ltd. (CB, Financial), Johnson & Johnson (JNJ, Financial), Occidental Petroleum Corp. (OXY, Financial), Rayonier Inc. (RYN, Financial), American International Group Inc. (AIG, Financial), Edison International (EIX, Financial) and NiSource Inc. (NI, Financial), among others.
The fund’s $20.12 billion equity portfolio, which is composed of 104 stocks, is largely invested in the financial services sector at 24.19%, followed by smaller holdings in the health care (13.02%) and industrials (12.41%) spaces.
Disclosure: No positions.
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