Dodge & Cox disclosed its third-quarter portfolio in mid-November, revealing that its top five trades included increased bets in Wells Fargo & Co. WFC and Raytheon Technologies Corp. RTX and position reductions in FedEx Corp. FDX, Microsoft Corp. MSFT and Goldman Sachs Group Inc. GS.
Through a nine-member investment policy committee, the San Francisco-based firm seeks long-term capital appreciation by investing in the stock of companies where the valuations are low and do not reflect long-term earnings and cash flow prospects.
As of the end of the third quarter, the firm's $109.28 billion equity portfolio contains 184 stocks, with three new positions and a turnover ratio of 4%. The top three sectors in terms of weight are financial services, technology and health care, representing 24.96%, 18.57% and 15.24% of the equity portfolio.
Wells Fargo
The firm purchased 27,618,684 shares of Wells Fargo, increasing the stake 26.72% and the equity portfolio 0.59%. Shares averaged $24.66 during the third quarter.
GuruFocus ranks the San Francisco-based bank's financial strength 3 out of 10 on the back of debt ratios underperforming over 66% of global competitors, suggesting high use of leverage compared to companies in other industries.
Other gurus with large holdings in Wells Fargo include Warren Buffett (Trades, Portfolio)'s Berkshire Hathaway Inc. BRK.ABRK.B, PRIMECAP Management (Trades, Portfolio) and Chris Davis (Trades, Portfolio)' Davis Selected Advisors.
Raytheon
The firm purchased 10,463,128 shares of Raytheon, increasing the position 52.69% and the equity portfolio 0.55%. Shares averaged $60.90 during the third quarter.
GuruFocus ranks the Waltham, Massachusetts-based aerospace and defense company's profitability 8 out of 10 on several positive investing signs, which include consistent revenue growth: Raytheon has a 3.5-star business predictability rank and a three-year revenue growth rate that outperforms over 68% of global competitors.
FedEx
The firm sold 9,605,597 shares of FedEx, trimming the holding 35.35% and the equity portfolio 1.24%. Shares averaged $199.73 during the third quarter.
GuruFocus ranks the Memphis, Tennessee-based logistic company's financial strength 4 out of 10 on the back of debt ratios underperforming over 60% of global competitors. Despite this, FedEx's profitability ranks 8 out of 10, driven by a 3.5-star business predictability rank and returns that are outperforming over 60% of global transportation companies.
Microsoft
The firm sold 2,531,124 shares of Microsoft, trimming the stake by 14.19% and the equity portfolio by 0.47%. Shares averaged $210.04 during the third quarter.
GuruFocus ranks the Redmond, Washington-based software giant's profitability 9 out of 10 on several positive investing signs, which include a high Piotroski F-score of 8 and profit margins and returns outperforming over 90% of global competitors.
Goldman Sachs
The firm sold 2,340,795 shares of Goldman Sachs, trimming the position 19.67% and the equity portfolio 0.42%. Shares averaged $203.48 during the third quarter.
GuruFocus ranks the New York-based investment bank's financial strength 3 out of 10 on the back of debt ratios underperforming over 70% of global competitors, suggesting high financial leverage.
Disclosure: The author has no positions in the stocks mentioned. The mention of portfolio trades reflects information as of the September 2020 portfolio date and do not include any trades and hedges made during October to December.
Read more here:
- 5 Business Services Companies to Consider in December
- Wasatch International Growth Fund's Top 3rd-Quarter Trades
- IVA International Fund's Top Trades in the 3rd Quarter
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