Steven Romick Drives Out Porsche Holding in 1st Quarter

Fund starts new year with multiple sells

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James Li
Apr 22, 2021
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Steven Romick (Trades, Portfolio), one of three portfolio managers of the FPA Crescent Fund, disclosed this week that the fund's top five trades during the first quarter included the closure of its Porsche Automobil Holding SE (XTER:PAH3, Financial) holding and reductions in its Jefferies Financial Group Inc. (JEF, Financial), Signature Bank (SBNY, Financial), Baidu Inc. (BIDU, Financial) and Dell Technologies Inc. (DELL, Financial) holdings.

The fund, which is managed by Romick, Mark Landecker and Brian Selmo, operates under Los Angeles-based

First Pacific Advisors (Trades, Portfolio). FPA Crescent seeks value in all parts of a company's capital structure, emphasizing investments in the common stock and convertible bonds of out-of-favor companies trading at discounts to private market value.

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FPA Crescent's portfolio contains both long and short positions. As of March, the fund's $7.13 billion equity portfolio contains 45 stocks with no new positions. The top four sectors in terms of weight are communication services, financial services, technology and basic materials, representing 28.16%, 22%, 16.48% and 10.39% of the equity portfolio.

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Sold out: Porsche

FPA Crescent sold 1,539,070 shares of Porsche (

XTER:PAH3, Financial), trimming the equity portfolio 1.44%. Shares averaged 67.51 euros ($81.24) during the first quarter; based on GuruFocus estimates, the fund gained approximately 32.88% on the stock since initially buying shares during the third quarter of 2017.

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GuruFocus ranks the German automobile company's financial strength 7 out of 10 on several positive investing signs, which include a double-digit Altman Z-score and a cash-to-debt ratio that outperforms over 86% of global competitors.

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Francisco Garcia Parames (Trades, Portfolio)' Cobas Asset Management has a holding in Porsche as of the December 2020 filing.

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Jefferies

The fund sold 5,556,659 shares of Jefferies (

JEF, Financial), discarding 48.68% of the stake and 1.85% of the equity portfolio. Shares averaged $28.52 during the first quarter; the stock is fairly valued based on Thursday's price-to-GF Value ratio of 0.98.

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GuruFocus ranks the New York-based diversified financial service company's financial strength 5 out of 10: Although the company has a high Piotroski F-score of 9, debt ratios are underperforming more than 70% of global competitors.

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Signature Bank

The fund sold 588,296 shares of Signature Bank (

SBNY, Financial), chopping 71.20% of the position and 1.08% of the equity portfolio. Shares averaged $197.29 during the first quarter; the stock is significantly overvalued based on Thursday's price-to-GF Value ratio of 1.58.

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GuruFocus ranks the New York-based bank's financial strength 3 out of 10 on the back of equity-to-asset and debt-to-equity ratios underperforming over 61% of global competitors.

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Baidu

The fund sold 329,414 shares of Baidu (

BIDU, Financial), shredding 47.54% of the position and 0.96% of the equity portfolio. Shares averaged $261.90 during the third quarter; the stock is significantly overvalued based on Thursday's price-to-GF Value ratio of 1.33.

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GuruFocus ranks the Beijing-based online search giant's profitability 8 out of 10 on several positive investing signs, which include a high Piotroski F-score of 7 and a net profit margin that outperforms more than 80% of global competitors.

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Dell Technologies

The fund sold 910,144 shares of Dell Technologies (

DELL, Financial), trimming the position 43.28% and the equity portfolio 0.90%. Shares averaged $80.81 during the first quarter.

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According to GuruFocus, the Round Rock, Texas-based software company's interest coverage and debt ratios underperform over 70% of global competitors, suggesting low financial strength.

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Disclosure: No positions.

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I am an editorial researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!