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Primecap Management Slims 4 Positions in October

California-based firm reports a few real-time sells

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Nov 10, 2021
Summary
  • Firm cuts Descartes Systems Group holding by approximately 11%.
  • Firm ships out 4.24% of CarMax stake.
  • Firm also reduces positions in JetBlue and NMI Holdings.
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PRIMECAP Management (Trades, Portfolio), an investment firm based in Pasadena, California, disclosed this week that it trimmed in October its holding in four companies: The Descartes Systems Group Inc. (DSGX, Financial), CarMax Inc. (KMX, Financial), JetBlue Airways Corp. (JBLU, Financial) and NMI Holdings Inc. (NMIH, Financial).

The firm applies an investing process that hinges on four key pillars: individual decision making, commitment to fundamental research, long-term investment horizon and focus on value. Primecap’s search begins with companies and industries that are out of favor among investors, yet conviction derived by the firm’s research efforts gives it the fortitude to stay the course during challenging markets.

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The firm manages several funds, including Vanguard’s PRIMECAP Fund and the PRIMECAP Odyssey Funds. Primecap’s $148.84 billion equity portfolio contains 334 stocks with a quarterly turnover ratio of 1%. The top four sectors in terms of weight are technology, health care, industrials and consumer cyclical, representing 30.24%, 26.97%, 12.33% and 10.74% of the equity portfolio.

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Descartes Systems Group

Primecap sold 479,021 shares of Descartes Systems Group (

DSGX, Financial), trimming 11% of the holding.

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Shares averaged $81.77 in October; the stock is significantly overvalued based on Wednesday’s price-to-GF Value ratio of 1.44.

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GuruFocus ranks the Waterloo, Ontario-based software company’s profitability 8 out of 10 on several positive investing signs, which include a four-star business predictability rank, a high Piotroski F-score of 8 and an operating margin that has increased approximately 4.3% per year on average over the past five years and is outperforming more than 91% of global competitors.

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Other gurus with holdings in Descartes include

Jim Simons (Trades, Portfolio)’ Renaissance Technologies and Chuck Royce (Trades, Portfolio)’s Royce Investment Partners.

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CarMax

Primecap sold 322,041 shares of CarMax (

KMX, Financial), discarding 4.24% of the holding.

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Shares of CarMax averaged $136.92 in October; the stock is modestly overvalued based on Wednesday’s price-to-GF Value ratio of 1.13.

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GuruFocus ranks the Richmond, Virginia-based vehicle retailer’s profitability 7 out of 10 on the back of a five-star business predictability rank and three-year revenue and earnings growth rates that are outperforming more than 75% of global competitors despite operating margins declining more than 10% on average over the past five years and underperforming over 70% of global vehicle and parts companies.

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Other gurus with holdings in CarMax include

Chuck Akre (Trades, Portfolio)’s Akre Capital Management and Ruane Cunniff (Trades, Portfolio).

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JetBlue

Primecap sold 341,169 shares of JetBlue (

JBLU, Financial), trimming 2.11% of the position.

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Shares of JetBlue averaged $14.03 in October; the stock is modestly overvalued based on Wednesday’s price-to-GF Value ratio of 1.26.

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GuruFocus ranks the Long Island City, New York-based airline’s financial strength 3 out of 10 on several warning signs, which include a weak Altman Z-score of 0.86 and debt ratios that underperform more than 72% of global competitors.

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NMI Holdings

Primecap sold 15,100 shares of NMI Holdings (

NMIH, Financial), trimming 0.56% of the stake.

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Shares of NMI Holdings averaged $24.28 during October; the stock is modestly undervalued based on Wednesday’s price-to-GF Value ratio of 0.89.

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GuruFocus ranks the Emeryville, California-based mortgage guaranty insurance company’s financial strength 4 out of 10 on the back of interest coverage and debt ratios underperforming more than 56% of global competitors.

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