We have recently updated the buys and sells of Steven Romick, the manager who has built solid consistent performance at FPA Crescent Fund. In this article we discuss his top holdings.
As discussed in the previous report, Steven Romick is very bullish on large cap stocks.
No. 1: ENSCO PLC (ESV, Financial), Weightings: 7.94% - 4,055,000 Shares
Ensco International plc, formerly ENSCO International Incorporated, is a provider of offshore contract drilling services to the international oil and gas industry. Ensco Plc has a market cap of $8.19 billion; its shares were traded at around $57.46 with a P/E ratio of 15.1 and P/S ratio of 4.7. The dividend yield of Ensco Plc stocks is 1.8%. Ensco Plc had an annual average earnings growth of 23.9% over the past 10 years. GuruFocus rated Ensco Plc the business predictability rank of 3.5-star.
FPA Funds are in general bullish about energy stocks. We can see this from both the portfolios of FPA Capital Funds, run by Robert Rodriguez and Steven Romick’s FPA Crescent Fund. Among Romick’s investments, the Oil Service companies stand out as an interesting area. In the 3Q08 Letter to Shareholders, Romick provided the following comment on Ensco International:
We have spoken about our position in Ensco International in the past and we revisit this second largest position today, as we believe that the market has priced this investment at levels that we deem silly. Rikard Ekstrand, prior to joining the Crescent Team, purchased it in 1999 for other accounts managed by First Pacific Advisors at about $10 per share, only to sell it in 2001 above $40. We then purchased the stock for Crescent after it declined back to $18.55 in 2001. We have held the position ever since, although the number of shares has been trimmed at substantively higher prices than where its stock trades today. We value Ensco using two methods, P/E and its premiumor discount to replacement value. We first bought the stock at an infinite P/E when it was break-even and sold it in 2001 at 28x trailing (but still far below normal) earnings per share and 137% of its replacement value and bought it back later that year at 14x earnings and a 77% discount to replacement value. We still hold our position and have been increasing it as it has declined to levels that we would deem to beless expensive than 1999 when oil and gas were trading at just $25.60 per barrel and $2.30 per mcf, respectively. You can see the earnings and replacement value at the inflection points when we have been either buyers or sellers of its stock in the table below. It is important to note that Ensco is a drilling company and its livelihood is predicated more on the need for pulling oil and gas from the ground than it is by its price. We believe drilling will continue relatively unimpacted by the decline in the price of the commodities, as long as the oil stays above $65 per barrel and gas stays above $8 per mcf.
ESV is also a favorite stock of renowned hedge fund manager David Einhorn.
No. 2: AON Corp. (AON, Financial), Weightings: 7.4% - 4,383,000 Shares
Aon Corporation is a holding company whose operating subsidiaries carry onbusiness in three distinct segments: insurance brokerage and other services; consulting; and insurance underwriting. Aon Corp. has a market cap of $17.14 billion; its shares were traded at around $51.94 with a P/E ratio of 16.9 and P/S ratio of 2. The dividend yield of Aon Corp. stocks is 1.1%. Aon Corp. had an annual average earnings growth of 2.7% over the past 10 years.
In Nov. 2010, Steven Romick commented AON in an interview with Businessweek’s Suzanne Woolley. He said:
Aon (AON) is the largest insurance broker in the world. They're brokers, not underwriters, so as the price to insure a building goes up, they'll make more money on their commission. The pricing for their products is relatively soft right now. At some point that will change and—given stable pricing and their cost-savings program—we'll make good money. We think interest rates are rising, which would be good for Aon. They have a ton of cash on the books that can be reinvested at a higher rate.
Steven Romick owns 4.3 million shares, which accounts for 7.4% of his equity portfolio. He is certainly very confident with AON, as he continues to buy the stock:
No. 3: COVIDIEN PLC. (COV, Financial), Weightings: 6.49% - 3,875,000 Shares
Covidien PLC, formerly Covidien Ltd, is engaged in the development, manufacture and sale of healthcare products for use in clinical and home settings. Covidien Plc. has a market cap of $26.25 billion; its shares were traded at around $53.01 with a P/E ratio of 15 and P/S ratio of 2.5. The dividend yield of Covidien Plc. stocks is 1.6%.
FPA Crescent Fund owns 3.8 million shares. This is the holding history. Steven Romick has kept buying the position.
No. 4: OCCIDENTAL PETROLEUM Corp. (OXY, Financial), Weightings: 5.92% - 1,645,000 Shares
Occidental Petroleum Corp. explores for, develops, produces and markets crude oil and natural gas and manufactures and markets a variety of basic chemicals, including chlorine, caustic soda, and ethylene dichloride, as well as specialty chemicals and vinyls, including polyvinyl chloride resins and vinyl chloride monomer. Occidental Petroleum Corp. has a market cap of $84.03 billion; its shares were traded at around $103.41 with a P/E ratio of 18.3 and P/S ratio of 4.4. The dividend yield of Occidental Petroleum Corp. stocks is 1.5%. Occidental Petroleum Corp. had an annual average earnings growth of 13.6% over the past 10 years.
Steven Romick commented this about Occidental:
They're a large exploration and production company. It's a business we like because it will benefit from oil being worth more in the future. It's really that simple. Every year you pull oil out, you're depleting your reserve. You then have to buy oil to replace it. Five years ago the oil companies said they'd have X amount in reserves in 2010. Occidental Petroleum (OXY) is the only large oil company that has actually met their projected reserve replacement—the goals that they laid out for themselves. His fund owns 1.6 million shares. This is his third largest position.
No. 5: CVS CAREMARK Corp. (CVS, Financial), Weightings: 5.72% - 4,483,085 Shares
CVS/Caremark is the nation's premier integrated pharmacy services provider, combining one of the nation's pharmaceutical services companies with the country's largest pharmacy chain. Cvs Caremark Corp. has a market cap of $45.48 billion; its shares were traded at around $33.47 with a P/E ratio of 12.4 and P/S ratio of 0.5. The dividend yield of Cvs Caremark Corp. stocks is 1.5%. Cvs Caremark Corp. had an annual average earning growth of 12.4% over the past 10 years. GuruFocus rated Cvs Caremark Corp. the business predictability rank of 4.5-star.
This is his comment regarding to CVS:
U.S. health-care spending is likely to grow faster than gross domestic product for the foreseeable future. Big chain pharmacies should continue to take market share from independent drugstores. We like CVS's (CVS) integrated model—it's a pharmacy and a prescription benefits manager. Prescriptions for generic drugs are increasing at a rate faster than branded drugs, and that's more profitable for pharmacies. CVS's valuation seems reasonable at less than 11 times its expected earnings for 2011. Steven
To check the complete list of Top Holdings of Steven Romick, please go to http://www.gurufocus.com/holdings.php?GuruName=Steven+Romick&tab=top
Also check out the Undervalued Stocks, Top Growth Companies, and High Yield stocks of Steven Romick.
Also check out:
As discussed in the previous report, Steven Romick is very bullish on large cap stocks.
No. 1: ENSCO PLC (ESV, Financial), Weightings: 7.94% - 4,055,000 Shares
Ensco International plc, formerly ENSCO International Incorporated, is a provider of offshore contract drilling services to the international oil and gas industry. Ensco Plc has a market cap of $8.19 billion; its shares were traded at around $57.46 with a P/E ratio of 15.1 and P/S ratio of 4.7. The dividend yield of Ensco Plc stocks is 1.8%. Ensco Plc had an annual average earnings growth of 23.9% over the past 10 years. GuruFocus rated Ensco Plc the business predictability rank of 3.5-star.
FPA Funds are in general bullish about energy stocks. We can see this from both the portfolios of FPA Capital Funds, run by Robert Rodriguez and Steven Romick’s FPA Crescent Fund. Among Romick’s investments, the Oil Service companies stand out as an interesting area. In the 3Q08 Letter to Shareholders, Romick provided the following comment on Ensco International:
We have spoken about our position in Ensco International in the past and we revisit this second largest position today, as we believe that the market has priced this investment at levels that we deem silly. Rikard Ekstrand, prior to joining the Crescent Team, purchased it in 1999 for other accounts managed by First Pacific Advisors at about $10 per share, only to sell it in 2001 above $40. We then purchased the stock for Crescent after it declined back to $18.55 in 2001. We have held the position ever since, although the number of shares has been trimmed at substantively higher prices than where its stock trades today. We value Ensco using two methods, P/E and its premiumor discount to replacement value. We first bought the stock at an infinite P/E when it was break-even and sold it in 2001 at 28x trailing (but still far below normal) earnings per share and 137% of its replacement value and bought it back later that year at 14x earnings and a 77% discount to replacement value. We still hold our position and have been increasing it as it has declined to levels that we would deem to beless expensive than 1999 when oil and gas were trading at just $25.60 per barrel and $2.30 per mcf, respectively. You can see the earnings and replacement value at the inflection points when we have been either buyers or sellers of its stock in the table below. It is important to note that Ensco is a drilling company and its livelihood is predicated more on the need for pulling oil and gas from the ground than it is by its price. We believe drilling will continue relatively unimpacted by the decline in the price of the commodities, as long as the oil stays above $65 per barrel and gas stays above $8 per mcf.
ESV is also a favorite stock of renowned hedge fund manager David Einhorn.
No. 2: AON Corp. (AON, Financial), Weightings: 7.4% - 4,383,000 Shares
Aon Corporation is a holding company whose operating subsidiaries carry onbusiness in three distinct segments: insurance brokerage and other services; consulting; and insurance underwriting. Aon Corp. has a market cap of $17.14 billion; its shares were traded at around $51.94 with a P/E ratio of 16.9 and P/S ratio of 2. The dividend yield of Aon Corp. stocks is 1.1%. Aon Corp. had an annual average earnings growth of 2.7% over the past 10 years.
In Nov. 2010, Steven Romick commented AON in an interview with Businessweek’s Suzanne Woolley. He said:
Aon (AON) is the largest insurance broker in the world. They're brokers, not underwriters, so as the price to insure a building goes up, they'll make more money on their commission. The pricing for their products is relatively soft right now. At some point that will change and—given stable pricing and their cost-savings program—we'll make good money. We think interest rates are rising, which would be good for Aon. They have a ton of cash on the books that can be reinvested at a higher rate.
Steven Romick owns 4.3 million shares, which accounts for 7.4% of his equity portfolio. He is certainly very confident with AON, as he continues to buy the stock:
No. 3: COVIDIEN PLC. (COV, Financial), Weightings: 6.49% - 3,875,000 Shares
Covidien PLC, formerly Covidien Ltd, is engaged in the development, manufacture and sale of healthcare products for use in clinical and home settings. Covidien Plc. has a market cap of $26.25 billion; its shares were traded at around $53.01 with a P/E ratio of 15 and P/S ratio of 2.5. The dividend yield of Covidien Plc. stocks is 1.6%.
FPA Crescent Fund owns 3.8 million shares. This is the holding history. Steven Romick has kept buying the position.
No. 4: OCCIDENTAL PETROLEUM Corp. (OXY, Financial), Weightings: 5.92% - 1,645,000 Shares
Occidental Petroleum Corp. explores for, develops, produces and markets crude oil and natural gas and manufactures and markets a variety of basic chemicals, including chlorine, caustic soda, and ethylene dichloride, as well as specialty chemicals and vinyls, including polyvinyl chloride resins and vinyl chloride monomer. Occidental Petroleum Corp. has a market cap of $84.03 billion; its shares were traded at around $103.41 with a P/E ratio of 18.3 and P/S ratio of 4.4. The dividend yield of Occidental Petroleum Corp. stocks is 1.5%. Occidental Petroleum Corp. had an annual average earnings growth of 13.6% over the past 10 years.
Steven Romick commented this about Occidental:
They're a large exploration and production company. It's a business we like because it will benefit from oil being worth more in the future. It's really that simple. Every year you pull oil out, you're depleting your reserve. You then have to buy oil to replace it. Five years ago the oil companies said they'd have X amount in reserves in 2010. Occidental Petroleum (OXY) is the only large oil company that has actually met their projected reserve replacement—the goals that they laid out for themselves. His fund owns 1.6 million shares. This is his third largest position.
No. 5: CVS CAREMARK Corp. (CVS, Financial), Weightings: 5.72% - 4,483,085 Shares
CVS/Caremark is the nation's premier integrated pharmacy services provider, combining one of the nation's pharmaceutical services companies with the country's largest pharmacy chain. Cvs Caremark Corp. has a market cap of $45.48 billion; its shares were traded at around $33.47 with a P/E ratio of 12.4 and P/S ratio of 0.5. The dividend yield of Cvs Caremark Corp. stocks is 1.5%. Cvs Caremark Corp. had an annual average earning growth of 12.4% over the past 10 years. GuruFocus rated Cvs Caremark Corp. the business predictability rank of 4.5-star.
This is his comment regarding to CVS:
U.S. health-care spending is likely to grow faster than gross domestic product for the foreseeable future. Big chain pharmacies should continue to take market share from independent drugstores. We like CVS's (CVS) integrated model—it's a pharmacy and a prescription benefits manager. Prescriptions for generic drugs are increasing at a rate faster than branded drugs, and that's more profitable for pharmacies. CVS's valuation seems reasonable at less than 11 times its expected earnings for 2011. Steven
To check the complete list of Top Holdings of Steven Romick, please go to http://www.gurufocus.com/holdings.php?GuruName=Steven+Romick&tab=top
Also check out the Undervalued Stocks, Top Growth Companies, and High Yield stocks of Steven Romick.
Also check out:
