The T Rowe Price Equity Income Fund (Trades, Portfolio), part of Baltimore-based T. Rowe Price Group Inc. (TROW, Financial), disclosed this week that its top four trades during the first quarter included a reduction in its DuPont de Nemours Inc. (DD, Financial) holding, new buys in International Flavors & Fragrances Inc. (IFF, Financial) and Bank of New York Mellon Corp. (BK, Financial) and a position boost to its Sempra Energy (SRE, Financial) holding.
Managed by John Linehan, the fund seeks long-term capital appreciation by investing primarily in large-cap stocks that trade below fair value and pay good dividends.
As of March 31, the fund's $18.05 billion equity portfolio contains 113 stocks, with eight new positions and a turnover ratio of 6%. The top four sectors in terms of weight are financial services, industrials, health care and technology, representing 22.72%, 12.54%, 12.25% and 9.57% of the equity portfolio.
DuPont de Nemours
The fund sold 3 million shares of DuPont de Nemours (DD, Financial), chopping 51.11% of the position and 1.31% of the equity portfolio. Shares averaged $76.28 during the first quarter; the stock is significantly overvalued based on Friday's price-to-GF Value ratio of 1.37.
GuruFocus ranks the Wilmington, Delaware-based chemical company's financial strength 4 out of 10 on several warning signs, which include a low Altman Z-score of 0.84 and interest coverage and debt ratios underperforming over 70% of global competitors.
Other gurus with holdings in DuPont de Nemours include Lee Ainslie (Trades, Portfolio)'s Maverick Capital and Mason Hawkins (Trades, Portfolio)' Southeastern Asset Management.
International Flavors & Fragrances
The fund purchased 1.36 million shares of International Flavors & Fragrances (IFF, Financial), giving the position 1.05% equity portfolio weight. Shares averaged $129.42 during the first quarter; the stock is modestly undervalued based on Friday's price-to-GF Value ratio of 0.83.
The New York-based chemical company produces ingredients for a wide range of food, beverage and personal care industries. GuruFocus ranks the company's profitability 7 out of 10 on several positive investing signs, which include profit margins and a Joel Greenblatt (Trades, Portfolio) return on capital outperforming over 66% of global competitors.
Pioneer Investments (Trades, Portfolio) and First Pacific Advisors (Trades, Portfolio) also have holdings in International Flavors & Fragrances.
Bank of New York Mellon
The fund purchased 1.95 million shares of Bank of New York Mellon (BK, Financial), giving the position 0.51% weight in the equity portfolio. Shares averaged $43.95 during the first quarter; the stock is fairly valued based on Friday's price-to-GF Value ratio of 0.91.
GuruFocus ranks the New York-based asset management company's financial strength 4 out of 10 on the back of debt ratios underperforming more than 52% of global competitors. Despite this, Bank of New York Mellon's profitability ranks 6 out of 10, driven by returns on equity and three-year revenue growth rates outperforming over 66% of global asset management companies.
Warren Buffett (Trades, Portfolio)'s Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial) has one of the largest holdings in Bank of New York Mellon, with over 70 million shares as of the December 2020 quarter filing.
Sempra Energy
The fund purchased 985,000 shares of Sempra Energy (SRE, Financial), boosting the position 93.36% and the equity portfolio 0.72%. Shares averaged $124.40 during the first quarter; the stock is fairly valued based on Friday's price-to-GF Value ratio of 1.02.
GuruFocus ranks the San Diego-based utility company's profitability 7 out of 10: Profit margins and returns are outperforming more than 78% of global competitors despite three-year revenue and earnings growth rates underperforming over 51% of global utility companies.
Disclosure: Author is long International Flavors & Fragrances and T. Rowe Price Group.
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