The Parnassus Endeavor Fund (Trades, Portfolio) recently released its portfolio updates for the fourth quarter of 2021, which ended on Dec. 31.
The fund is part of Parnassus Investments, which follows a socially responsible value-based strategy, investing in a wide range of deeply discounted, out-of-favor stocks that have long-term competitive advantages and relevancy, quality management and positive scores on environmental, social and corporate governance criteria. It is managed by senior research analyst Billy Hwan, CPA, CFA. Jerome Dodson (Trades, Portfolio), the founder of Parnassus Investments, stepped down from the board of trustees effective Jan. 1, 2021 and will no longer be managing the funds, though he will remain chairman of the board.
In July of last year, Affiliated Managers Group announced it was paying $600 million to acquire a majority stake in Parnassus Investments, so more changes could be on the way for the firm.
Based on its investing criteria, the fund’s top buys for the quarter were Sysco Corp. (SYY, Financial) and Global Payments Inc. (GPN, Financial), while its biggest sells were Omnicom Group Inc. (OMC, Financial) and Seagate Technology Holdings PLC (STX, Financial).
Sysco
The Fund established a new holding of 1,854,070 shares in Sysco Corp. (SYY, Financial), giving the stock a 2.71% weight in the equity portfolio. During the quarter, shares changed hands for an average price of $76.89 apiece.
Sysco is a wholesale commercial food company based in Houston. It markets and distributes food products, smallwares, kitchen equipment and tabletop items to restaurants, health care facilities, schools, hotels and more.
On Jan. 17, shares of Sysco traded around $79.79 for a market cap of $40.90 billion. The GF Value Line assigns the stock a rating of fairly valued.
The company has a financial strength rating of 5 out of 10, with the Altman Z-Score of 4.8 and the Piotroski F-Score of 5 out of 9 showing financial stability. Its profitability is rated 7 out of 10. The return on equity and return on capital are outperforming more than 82% of industry peers.
Global Payments
The Fund also took a 1,060,066-share stake in Global Payments (GPN, Financial), giving the position a 2.67% weight in the equity portfolio. The stock was trading around $137.30 per share in the three months through the end of December.
Based in Atlanta, Global Payments is a payment processing company that provides payment technology and software solutions to merchants, issuers and consumers. It processes credit and debit card payments as well as contactless and digital payments.
On Jan. 17, shares of Global Payments traded around $150.55 for a market cap of $43.68 billion. The GF Value Line rates the stock as modestly undervalued.
The company has a financial strength rating of 4 out of 10, with the strong Piotroski F-Score of 8 out of 9 countered by a low interest coverage ratio of 3.9. Its profitability is rated 8 out of 10 on the back of operating and net margins that are higher than 80% of other business services companies.
Omnicom Group
The Fund sold out of its 1,721,672-share Omnicom Group (OMC, Financial) holding, which previously took up 2.58% of the equity portfolio. During the quarter, shares traded for an average price of $71.06 each.
Headquartered in New York, Omnicom is a global media, marketing and corporate communications company. Through its network of subsidiaries, the company provides advertising, customer relationship management, public relations and specialty services in over 100 countries.
On Jan. 17, shares of Omnicom traded around $79.60 for a market cap of $16.92 billion. According to the GF Value Line, the stock is fairly valued.
The company has a financial strength rating of 5 out of 10. The cash-debt ratio of 0.71 and interest coverage ratio of 9.06 are low for the industry but still stable. Its profitability is rated 7 out of 10. The return on invested capital has been surpassing the weighted average cost of capital in recent years, showing profitability.
Seagate Technology Holdings
The fund also ditched all 1,246,543 of its Seagate Technology Holdings (STX, Financial) shares, which made up 2.13% of the equity portfolio. Shares traded for around $97.65 apiece on average during the quarter.
Seagate Technology is an Irish-American global data storage company and a world leader in data storage infrastructure solutions. Its main products are hard disk drives, which it manufactures at its facilities in California and Ireland.
On Jan. 17, shares of Seagate Technology traded around $102.90 for a market cap of $24.31 billion. The GF Value Line assigns the stock a rating of significantly overvalued.
The company has a financial strength rating of 4 out of 10. The cash-debt ratio is weak at only 0.19, but the Piotroski F-Score of 7 out of 9 suggests a healthy financial situation. Its profitability is rated 8 out of 10 on the back of a three-year revenue per share growth rate of 4.4% and a three-year earnings per share without non-recurring items growth rate of 9.8%.
Portfolio overview
As of the latest 13F report, the Parnassus Endeavor Fund (Trades, Portfolio) held common stock positions in 43 companies valued at a total of $5.37 billion. The turnover for the quarter was 8%.
By portfolio weight, the top holding was Charles Schwab Corp. (SCHW, Financial) with 3.70% of the equity portfolio, followed by Cisco Systems Inc. (CSCO, Financial) with 3.54% and Verizon Communications Inc. (VZ, Financial) with 3.41%.
In terms of sector weighting, the fund was most invested in technology, health care and financial services.
