While billionaire gurus Daniel Loeb (Trades, Portfolio), leader of Third Point, and David Rolfe (Trades, Portfolio), head of Wedgewood Partners, take different approaches to investing, they still have several portfolio holdings in common.
Using an event-driven, value-oriented approach to picking stocks, Loeb’s New York-based firm is known for taking activist positions in underperforming companies with a catalyst that will help unlock value for shareholders.
In contrast, Rolfe’s St. Louis-based firm approaches potential investments with the mindset of a business owner, hoping to generate significant long-term wealth by analyzing a handful of undervalued companies that have a dominant product or service, consistent earnings, revenue and dividend growth, are highly profitable and have strong management teams.
According to GuruFocus’ Aggregated Portfolio, a Premium feature, the two gurus both have positions in Microsoft Corp. (MSFT, Financial), Facebook Inc. (FB, Financial), Visa Inc. (V, Financial), S&P Global Inc. (SPGI, Financial) and Alphabet Inc. (GOOGL, Financial) as of the end of the second quarter.
Microsoft
While Loeb left his stake in Microsoft (MSFT, Financial) unchanged during the three months ended June 30 at 1.6 million shares, Rolfe curbed his position by 5.28% to 133,336 shares. They have a combined equity portfolio weight of 7.77% in the stock.
The Redmond, Washington-based software company, which is known for its Windows operating system and Microsoft Office products, has a $2.22 trillion market cap; its shares were trading around $295.26 on Monday with a price-earnings ratio of 36.69, a price-book ratio of 15.64 and a price-sales ratio of 13.37.
The GF Value Line suggests the stock is significantly overvalued based on its historical ratios, past performance and future earnings projections.
GuruFocus rated Microsoft’s financial strength 6 out of 10, driven by a comfortable level of interest coverage as well as a high Altman Z-Score of 8.85, indicating the company is in good standing even though assets are building up at a faster rate than revenue is growing. The return on invested capital also overshadows the weighted average cost of capital, suggesting good value creation is occurring as the company grows.
The company’s profitability fared even better, scoring a 9 out of 10 rating on the back of an expanding operating margin, strong returns on equity, assets and capital that outperform a majority of competitors and a high Piotroski F-Score of 8 out of 9, indicating business conditions are healthy. As a result of consistent earnings and revenue growth, Microsoft also has a predictability rank of 2.5 out of five stars. According to GuruFocus, companies with this rank return an average of 7.3% annually over a 10-year period.
GuruFocus estimates Loeb has gained 20.82% on the investment, which he has had since the third quarter of 2020. Rolfe has yielded a 51.21% return since establishing the position in the first quarter of 2020.
Other gurus with significant positions in the stock include Ken Fisher (Trades, Portfolio), Pioneer Investments, PRIMECAP Management (Trades, Portfolio), Chase Coleman (Trades, Portfolio), Dodge & Cox, Spiros Segalas (Trades, Portfolio), Baillie Gifford (Trades, Portfolio), Steve Mandel (Trades, Portfolio), Andreas Halvorsen (Trades, Portfolio) and Jeremy Grantham (Trades, Portfolio).
Loeb left his holding of Facebook (FB, Financial) unchanged in the second quarter with 1 million shares. Rolfe, on the other hand, reduced his 148,764-share holding by 5.94%. The stock has a combined weight of 9.45% in their equity portfolios.
The social media giant, which is headquartered in Menlo Park, California, has a market cap of $990.25 billion; its shares were trading around $351.72 on Monday with a price-earnings ratio of 26.06, a price-book ratio of 7.2 and a price-sales ratio of 9.7.
According to the GF Value Line, the stock is fairly valued currently.
Facebook’s financial strength was rated 7 out of 10 by GuruFocus, driven by a comfortable level of interest coverage and a robust Altman Z-Score of 21.09. The company’s ROIC also eclipses its WACC, suggesting it is creating value as it grows.
The company’s profitability fared even better with a perfect 10 out of 10 rating. Despite recording a decline in its operating margin, Facebook is supported by strong returns that top a majority of industry peers, a high Piotroski F-Score of 7 and steady earnings and revenue growth. It also has a five-star predictability rank. GuruFocus says companies with this rank return an average of 12.1% annually.
GuruFocus data shows Loeb has gained an estimated 33.46% on the investment so far. Rolfe has gained approximately 23.25% on the investment over its lifetime.
Baillie Gifford (Trades, Portfolio) is the company’s largest guru shareholder with a 0.28% stake. Frank Sands (Trades, Portfolio), Segalas, Pioneer, Coleman, Mandel, Fisher, Dodge & Cox and several other gurus also have significant positions in the stock.
Visa
Rolfe reduced his 140,546-share Visa (V, Financial) holding by 4.31% in the second quarter, while Loeb left his position unchanged at 1.5 million shares. The stock has a combined equity portfolio weight of 6.81%.
The San Francisco-based company, which facilitates electronic payments and provides credit card services, has a $503.89 billion market cap; its shares were trading around $229.34 on Monday with a price-earnings ratio of 46.4, a price-book ratio of 14.54 and a price-sales ratio of 22.88.
Based on the GF Value Line, the stock appears to be modestly overvalued currently.
GuruFocus rated Visa’s financial strength 6 out of 10. In addition to sufficient interest coverage, the Altman Z-Score of 8.14 indicates it is in good standing currently. The ROIC also surpasses the WACC, so value is being created.
The company’s profitability fared better, scoring a 9 out of 10 rating on the back of operating margin expansion and strong returns that outperform a majority of competitors. Although Visa has recorded a slowdown in revenue per share growth over the past 12 months, it still has a five-star predictability rank.
According to GuruFocus, Loeb has gained an estimated 33.65% on the investment since establishing it in the second quarter of 2018. Rolfe has gained approximately 123.95% on the long-held investment.
S&P Global
Loeb left his 1 million-share S&P Global (SPGI, Financial) stake unchanged during the second quarter, while Rolfe slashed his 41,555-share holding by 5.12%. The gurus have a combined portfolio weight of 4.87% in the stock.
Headquartered in New York, the company, which provides financial analytics and ratings, has a market cap of $106.42 billion; its shares were trading around $442.44 on Monday with a price-earnings ratio of 43.38, a price-book ratio of 84.08 and a price-sales ratio of 13.63.
The GF Value Line suggests the stock is modestly overvalued currently.
S&P Global’s financial strength was rated 5 out of 10 by GuruFocus. In addition to sufficient interest coverage, the company is supported by a robust Altman Z-Score of 8.71. The ROIC is also meaningfully above the WACC, indicating good value creation is occurring.
The company’s profitability scored an 8 out of 10 rating, driven by an expanding operating margin, strong returns that outperform a majority of industry peers and a high Piotroski F-Score of 8. S&P Global’s one-star predictability rank is on watch, however. GuruFocus data shows companies with this rank return an average of 1.1% annually.
Loeb has gained roughly 91.14% on his investment since the second quarter of 2016. GuruFocus data shows Rolfe has gained around 40.7% since establishing his position in the fourth quarter of 2019.
Alphabet
During the quarter, both gurus reduced their holdings of Alphabet’s (GOOGL, Financial) Class A stock. Loeb now holds 200,000 shares while Rolfe has 22,316 shares, which account for a combined portfolio weight of 10.76%.
The Mountain View, California-based tech giant, which is the parent company of Google and YouTube, has a $1.89 trillion market cap; its Class A shares were trading around $2,829.29 on Monday with a price-earnings ratio of 30.64, a price-book ratio of 7.93 and a price-sales ratio of 8.76.
According to the GF Value Line, the stock appears to be significantly overvalued currently.
GuruFocus rated Alphabet’s financial strength 8 out of 10. In addition to comfortable interest coverage, the company is supported by a robust Altman Z-score of 14.22. The ROIC also eclipses the WACC, indicating good value creation is occurring.
The company’s profitability scored a 9 out of 10 rating. Even though the operating margin is in decline, Alphabet is supported by strong returns that outperform a majority of competitors as well as a high Piotroski F-Score of 7. Boosted by consistent earnings and revenue growth, the company also has a five-star predictability rank.
Since establishing the position in fourth-quarter 2020, GuruFocus estimates Loeb has gained 25.1% on the investment. Rolfe has gained approximately 86.67% on his long-held investment.
With a 0.27% stake, Fisher is the company’s largest guru shareholder. PRIMECAP Management (Trades, Portfolio) and Pioneer Investments also have significant positions in the stock.
Portfolio composition
Loeb’s $17.07 billion equity portfolio, which was composed of 125 stocks as of the three months ended June 30, is most heavily invested in the technology and financial services spaces.
Nygren’s $690 million equity portfolio, which is composed of 40 stocks, is most heavily invested in the technology, financial services and communication services sectors.
