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James Li
James Li
Articles (1533) 

T Rowe Price Equity Income Fund's Top 5 Buys in the 2nd Quarter

Fund of Baltimore-based firm establishes new holdings in Merck and Volkswagen

The T Rowe Price Equity Income Fund (Trades, Portfolio), part of Baltimore-based T. Rowe Price Group Inc. (NASDAQ:TROW), disclosed this week that its top five buys during the second quarter included new positions in Volkswagen AG (XTER:VOW3) and Merck & Co. Inc. (NYSE:MRK). The fund also raised its stakes in Enbridge Inc. (NYSE:ENB), Becton, Dickinson and Co. (NYSE:BDX) and Loews Corp. (NYSE:L).

Fund manager John Linehan pursues dividend income and long-term growth potential. The Equity Income Fund invests in the stocks of established companies that are expected to pay above-average dividends and are trading at attractive valuations.


As of the June quarter's end, the fund’s $14.10-billion equity portfolio contained 104 stocks, with 11 new holdings and a turnover ratio of 9%. The portfolio’s top three sectors in terms of weight include financial services, health care and industrials, with weights of 20.92%, 15.49% and 11.93%, respectively.



The Equity Income Fund purchased 400,000 shares of Volkswagen, giving the position a 0.43% weight in the equity portfolio. Shares averaged 127.72 euros ($145.38) during the second quarter.


The Wolfsburg, Germany-based company manufactures automotive brands like Volkswagen, Audi, Bugatti and Porsche. GuruFocus ranks Volkswagen’s profitability 6 out of 10 on the back of net margins and returns on equity outperforming over 68% of global competitors, despite operating margins outperforming just over 59% of global auto manufacturers. Additionally, Volkswagen’s predictability ranks three stars out of five despite a three-year revenue growth rate that outperforms just 55% of global peers.


Sarah Ketterer (Trades, Portfolio)’s Causeway International Value (Trades, Portfolio) Fund also has a holding in Volkswagen.



The fund purchased 660,000 shares of Merck, giving the position a 0.36% weight in the equity portfolio. Shares averaged $78.88 during the June quarter.


The Kenilworth, New Jersey-based company manufactures pharmaceutical products for the treatment of a wide range of therapeutic areas, including cardiovascular disease, asthma, cancer and infections. GuruFocus ranks the company’s profitability 8 out of 10 on several positive investing signs, which include a high Piotroski F-score of 8, a return on equity that outperforms 97.75% of global competitors and an operating margin that has increased approximately 9% per year on average over the past five years.


Gurus with large holdings in Merck include Ken Fisher (Trades, Portfolio), Pioneer Investments (Trades, Portfolio) and the Vanguard Health Care Fund (Trades, Portfolio).



The fund purchased 3.62 million shares of Enbridge, increasing the position 495.89% and impacting the equity portfolio by 0.78%. Shares averaged $30.68 during the second quarter.


The Calgary, Alberta-based company distributes and transports oil and gas through its pipeline network, which consists of the Canadian Mainline system, regional oil sands pipelines and natural gas pipelines. GuruFocus ranks the company’s profitability 6 out of 10 on the heels of profit margins outperforming over 73% of global competitors, partially offset by three-year revenue and earnings growth rates underperforming over 60% of global midstream energy companies.


Becton Dickinson

The fund added 315,000 shares of Becton Dickinson, increasing the position 64.29% and impacting the equity portfolio by 0.54%. Shares averaged $246.67 during the second quarter.


The Franklin Lakes, New Jersey-based company manufactures and distributes surgical products like needles, syringes and sharps-disposal units. GuruFocus ranks the company’s profitability 8 out of 10 on the heels of a GuruFocus business predictability rank of three stars, a high Piotroski F-score of 7 and operating margins that are outperforming 71.20% of global competitors.



The fund purchased 1,461,472 shares of Loews, increasing the holding 39.18% and impacting the equity portfolio by 0.35%. Shares averaged $33.79 during the quarter.


GuruFocus ranks the New York-based property and casualty insurance company’s financial strength 3 out of 10 on the heels of cash-to-debt and debt-to-equity ratios underperforming over 84% of global competitors, suggesting high financial leverage.


Disclosure: No positions.

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