Jean-Marie Eveillard (Trades, Portfolio), a native of Poitiers, France, is the former lead portfolio manager for First Eagle Investment. In his 21 years in the position, Eveillard built a reputation as one of the most successful value investors of his generation.
He received a Lifetime Achievement Award from Morningstar in 2003 for his successful long-term record. Eveillard left the position in 2004, but returned in 2007 until Matt McLennan took over in 2008. Eveillard currently serves as a senior advisor to the First Eagle Investment Management Global Value team.
When GuruFocus met with Eveillard at his office in New York City in January, Eveillard said genuine value investors can tolerate short-term underperformance in a stock. Indeed, Eveillard stated in an interview in 2008 that he pays no attention to what happens in the short term. Similar to Peter Lynch’s advice to know the basic story of a company before investing, Eveillard said investors should identify the five or six major advantages or disadvantages a firm faces, and ignore the trivial details.
And just like Warren Buffett (Trades, Portfolio), Eveillard spends about half his day simply reading. Unlike many today, however, Eveillard still reads magazines, books, and reports exclusively in print.
While being a voracious reader probably won’t transform everyone into a successful investor, Eveillard gave an interesting view in an interview with King World News in 2012: Gold can’t be overvalued. Eveillard views gold as a true substitute currency, and therefore everyone should own some gold.
But apart from gold, here are First Eagle’s top five holdings as of June 30.
1. Microsoft (MSFT, Financial)
First Eagle holds more than 35.5 million shares of Microsoft at an average price of $29.89 per share. The software giant comprises 3.6% of the portfolio.
First Eagle has only sold a portion of its holdings on two occasions since the second quarter of 2009: once in the fourth quarter of 2009 and in the first quarter of 2010. Microsoft is also the only one of the top five holdings where the average price of shares sold was less than the price of shares bought — $28.68 compared to $29.89.
Microsoft’s stock is currently trading at $45.76; its DCF fair value is $39.56, suggesting the stock is slightly overvalued.
While Microsoft’s size might lead some to classify it as a stalwart, the company’s gross profit is continuously increasing, and was reported at almost $60 billion in FY 2014. The gross margin was an impressive 69%. The chart below compares Microsoft’s revenue and net income.
Dodge & Cox, Jeff Ubben (Trades, Portfolio), and PRIMECAP Management (Trades, Portfolio) collectively hold 2.71% of Microsoft’s shares outstanding.
Oracle comprises 3.3% of the portfolio, with more than 33 million shares at an average cost of $30.94. First Eagle has held a stake in Oracle since March 2012, and has never sold any of the shares.
Oracle’s technologies include cloud computing, virtualization, and systems management. Its software solutions help customers reduce the cost and complexity of their IT infrastructures.
GuruFocus ranks the company’s financial strength as a 7/10, and its profitability and growth as 9/10. One thing to notice is Oracle’s relatively high debt-to-equity ratio of 0.69 for the trailing 12 months.
Gross profit is was more than $31 billion in FY 2014, and gross margin is about 81%, much higher than the industry average of 32.2.
Of the investors that Gurufocus follows, Jeremy Grantham (Trades, Portfolio) owns the highest percentage of Oracle’s outstanding shares, at 0.93%. James Barrow (Trades, Portfolio) owns 0.83% of shares, and First Eagle comes in third in terms of Oracle holdings.
First Eagle owns almost 23 million shares of the global media company, which accounts for 3% of the portfolio and 0.88% of shares outstanding.
Comcast’s two main businesses are Comcast Cable and NBCUniversal. Its operations are split into five segments: cable communications, cable networks, broadcast television, filmed entertainment, and theme parks.
The company’s revenue per share is growing steadily, reporting at 24.26 for FY 2013. First Eagle has been strategic when selling shares in Comcast; the average price of shares sold was $45.60.
Comcast is currently trading at $51.62; its DCF fair value is $80.85, indicating 36% in margin of safety. This, combined with the company’s predictability in revenue per share and EBITDA, indicate Comcast in undervalued and presents an opportunity for a great bargain. The chart below shows Comcast’s history in EBITDA and revenue per share.
First Eagle, by far, owns the highest number of shares among all gurus; Donald Yacktman (Trades, Portfolio) is second, with about 8.5 million shares.
First Eagle owns almost 40 million shares of Intel at an average price of $22.13 per share. The company accounts for 3% of its portfolio, and owns 0.79% of shares outstanding.
In First Eagle’s commentary for the second quarter of 2014, the firm cited Intel as one of their portfolio’s top performers. Intel’s performance improved on many measures compared to the second quarter of 2013, including gross profit, gross margin, and debt-to-equity.
Intel’s current P/E ratio is 16.5, which is largely on par with the industry median.
The semiconductor chip-maker develops advanced digital technology products, mainly integrated circuits, for the computing and communications industries.
Intel currently trades at $33.42, which recently surpassed its Peter Lynch earnings line, indicating the stock may be overvalued.
Only James Barrow (Trades, Portfolio) holds a higher stake in Intel than First Eagle, at 1.16%.
5. Canadian Natural Resources (CNQ, Financial)
First Eagle holds more than 25 million shares in Canadian Natural Resources, one of the largest independent crude oil and natural gas producers in the world. The company comprises 2.8% of the portfolio.
First Eagle has held shares in the company since December 2012, at an average price of $29.64 per share. It sold shares on two occasions since then at an average price of $40.21 per share.
Canadian Natural has assets in North America, the North Sea, and offshore Africa, and has a mix portfolio of natural gas, light oil, and oil sand mining among others.
A cause for concern is the company’s long-term debt far outpaces its total current assets. In FY 2013, Canadian Natural’s current assets were a little more than $2 billion, while long-term debt amounted to more than $7.5 billion.
Canadian Natural’s P/E ratio is 14.1. GuruFocus ranks its financial strength as 7/10 and its profitability and growth as 8/10.
First Eagle holds the most shares of Canadian Natural among all the gurus and investment firms. Chris Davis (Trades, Portfolio) is second, holding more than 18.5 million shares.
