The Elfun Trusts (Trades, Portfolio) disclosed its fourth-quarter portfolio in February.
With the goal of generating long-term capital growth and future income, the fund, which is part of Boston-based State Street Global Advisors, picks U.S. stocks based on the company's potential to increase future net income and dividends over time. It is managed by Christopher Sierakowski and William Sandow. Its previous manager, David Carlson, stepped away from the fund in 2019.
Taking these criteria into consideration, the fund established new positions in Ross Stores Inc. (ROST, Financial), ConocoPhillips (COP, Financial) and Air Products & Chemicals Inc. (APD, Financial), divested of its holdings in Chevron Corp. (CVX, Financial) and Albemarle Corp. (ALB, Financial) and added to or trimmed a number of other existing investments.
Ross Stores
Elfun Trusts (Trades, Portfolio) invested in 509,900 shares of Ross Stores (ROST, Financial), allocating 1.86% of the equity portfolio to the holding. The stock traded for an average price of $105 per share during the quarter.
The Dublin, California-based retail company, which owns and operates discount department stores like Ross Dress for Less, has a $43.01 billion market cap; its shares were trading around $120.38 on Monday with a price-earnings ratio of 143.64, a price-book ratio of 14.16 and a price-sales ratio of 3.37.
The GF Value line shows the stock is significantly overvalued currently based on historical ratios, past performance and future earnings projections. The GuruFocus valuation rank of 1 out of 10 supports this assessment as the share price and price ratios are all approaching 10-year highs.
GuruFocus rated Ross Stores' financial strength 5 out of 10, driven by adequate interest coverage and a high Altman Z-Score of 4.19 that indicates it is in good standing. The return on invested capital, however, is eclipsed by the weighted average cost of capital, meaning the company is having issues creating value.
The company's profitability fared much better, scoring a 9 out of 10 rating on the back of margins and returns that outperform over half of its competitors and a moderate Piotroski F-Score of 5, which indicates operations are stable. The predictability rank of five out of five stars, however, is on watch as a result of revenue per share declining over the past 12 months. According to GuruFocus, companies with this rank return an average of 12.1% annually over a 10-year period.
Of the gurus invested in Ross, PRIMECAP Management (Trades, Portfolio) has the largest stake with 3.08% of outstanding shares. Other top guru shareholders include Pioneer Investments (Trades, Portfolio), Steven Cohen (Trades, Portfolio), First Eagle Investment (Trades, Portfolio), Louis Moore Bacon (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Lee Ainslie (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio).
ConocoPhillips
The fund picked up 1.04 million shares of ConocoPhillips (COP, Financial), dedicating 1.23% of the equity portfolio to the stake. Shares traded for an average price of $36.93 each during the quarter.
The oil and gas giant, which is headquartered in Houston, has a market cap of $72.25 billion; its shares were trading around $53.27 on Monday with a price-book ratio of 1.91 and a price-sales ratio of 3.07.
According to the GF Value line, the stock appears to be significantly overvalued currently. The GuruFocus valuation rank of 2 out of 10 aligns with this assessment since the share price and price-sales ratio are both closing in on multiyear highs.
ConocoPhillips' financial strength was rated 4 out of 10 by GuruFocus as the Altman Z-Score of 2.39 indicates the company is under some pressure.
The company's profitability scored a 5 out of 10 rating on the back of negative margins and returns that underperform over half of its industry peers. ConocoPhillips also has a low Piotroski F-Score of 3, indicating poor operating conditions, and the one-star predictability rank is on watch as a result of revenue per share declining over the past three years. GuruFocus says companies with this rank return, on average, 1.1% annually.
With a 0.38% stake, Fisher is the company's largest guru shareholder. Pioneer, Cohen, Yacktman Asset Management (Trades, Portfolio), Sarah Ketterer (Trades, Portfolio), Tweedy Browne (Trades, Portfolio), the Smead Value Fund (Trades, Portfolio), the T Rowe Price Equity Income Fund (Trades, Portfolio), Bacon, Greenblatt and several other gurus also have positions in the stock.
Air Products & Chemicals
Elfun entered a 37,700-share position in Air Products & Chemicals (APD, Financial), giving it 0.31% space in the equity portfolio. The stock traded for an average per-share price of $281.41 during the quarter.
The Allentown, Pennsylvania-based company, which provides gases and chemicals for industrial uses, has a $57.9 billion market cap; its shares were trading around $261.65 on Monday with a price-earnings ratio of 30.71, a price-book ratio of 4.59 and a price-sales ratio of 6.48.
Based on the GF Value line, the stock appears to be modestly overvalued. The GuruFocus valuation rank of 1 out of 10 supports this assessment.
GuruFocus rated Air Products' financial strength 6 out of 10. Although the company has issued approximately $4 billion in new long-term debt over the past several years, it is at a manageable level due to having sufficient interest coverage. The Altman Z-Score of 4.35 also indicates the company is in good standing even though revenue per share growth has slowed over the past year. The ROIC is also above the WACC, indicating good value creation.
The company's profitability scored a 7 out of 10 rating, driven by an expanding operating margin, strong returns that outperform a majority of its competitors and a moderate Piotroski F-Score of 4. Air Products also has a one-star predictability rank.
Andreas Halvorsen (Trades, Portfolio) is the company's largest guru shareholder with a 0.29% stake. Pioneer, Ray Dalio (Trades, Portfolio), Jones, Cohen, Mario Gabelli (Trades, Portfolio), Barrow, Hanley, Mewhinney & Strauss, Lee Ainslie (Trades, Portfolio), Dodge & Cox and Fisher also own the stock.
Chevron
With an impact of -1.33% on the equity portfolio, the fund divested of its Chevron (CVX, Financial) holding, selling all 566,600 shares. During the quarter, the stock traded for an average price of $81.13 per share.
GuruFocus estimates Elfun lost 11.16% on the long-held investment.
The energy company, which is headquartered in San Ramon, California, has a market cap of $197.66 billion; its shares were trading around $102.70 on Monday with a price-book ratio of 1.48 and a price-sales ratio of 2.04.
The GF Value line and valuation rank of 2 out of 10 both point toward overvaluation, especially since the share price and price-sales ratio are closing in on multiyear highs.
Chevron's financial strength and profitability were both rated 5 out of 10 by GuruFocus. Despite having no long-term debt currently, the Altman Z-Score of 0.81 warns the company could be in danger of going bankrupt.
The company is also being weighed down by negative margins, but its returns are outperforming over half of its industry peers. Chevron also has a moderate Piotroski F-Score of 5, but the one-star predictability rank is on watch due to a decline in revenue per share over the past several years.
Of the gurus invested in Chevron, Warren Buffett (Trades, Portfolio) has the largest stake with 2.52% of its outstanding shares. Other top guru shareholders include Pioneer, Fisher, Diamond Hill and Barrow, Hanley, Mewhinney & Strauss.
Albemarle
Impacting the equity portfolio by -0.99%, the fund eliminated its 340,000-share Albemarle (ALB, Financial) holding. During the quarter, shares traded for average price of $119.23 each.
GuruFocus data shows the fund gained an estimated 18.59% on the investment.
The Charlotte, North Carolina-based chemical manufacturing company has a $17.85 billion market cap; its shares were trading around $153.07 on Monday with a price-earnings ratio of 43.5, a price-book ratio of 3.87 and a price-sales ratio of 5.23.
According to the GF Value line, the stock is significantly overvalued currently. The GuruFocus valuation rank of 1 out of 10 aligns with this assessment.
GuruFocus rated Albemarle's financial strength 5 out of 10. Despite issuing approximately $1.5 billion in new long-term debt over the past three years, it is at a manageable level due to having adequate interest coverage. The Altman Z-Score of 2.75, however, indicates it is under some pressure since the WACC is above the ROIC, indicating struggles with creating value.
The company's profitability fared better with a 7 out of 10 rating. In addition to strong margins and returns that outperform over half of its competitors, Albmarle has a moderate Piotroski F-Score of 4. The one-star predictability rank, however, is on watch due to revenue per share declining over the past year.
PRIMECAP is the company's largest guru shareholder with a 4.27% stake. Pioneer, Chuck Royce (Trades, Portfolio), Tom Gayner (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio) and Jones also own the stock.
Additional trades and portfolio performance
Other major trades the fund made during the quarter included an increased bet in Qualcomm Inc. (QCOM, Financial) as well as reductions in Applied Materials Inc. (AMAT, Financial), The Walt Disney Co. (DIS, Financial), Alexion Pharmaceuticals Inc. (ALXN, Financial) and Salesforce.com Inc. (CRM, Financial).
Elfun's $3.37 billion equity portfolio, which is composed of 45 stocks, is largely invested in the technology and financial services sectors, followed by a smaller position in the communication services space.
According to its website, the fund posted a 25.07% return in 2020, outperforming the S&P 500's return of 18.4%.
Disclosure: No positions.
Read more here:
- Robert Olstein's Top Trades of the 4th Quarter
- The Top 5 Trades of Ronald Muhlenkamp's Firm
- Steven Cohen Dives Into Chimerix
Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.
