Jerome Dodson (Trades, Portfolio) of the Parnassus Fund acquired two new holdings and sold out of two others during the third quarter.
Dodson founded Parnassus Investments in 1984. The firm has a contrarian approach and invests in companies with wide moats or strong competitive advantages, have long-term relevancy, have good management and are trading at a significant discount to their intrinsic values.
The guru purchased 195,000 shares in KLA-Tencor Corp. (KLAC, Financial) for $71.98 per share. The transaction had an impact of 1.8% on the portfolio.
The company, which supplies process control and yield management solutions for the semiconductor industry, has a market cap of $11.3 billion with an enterprise value of $11.8 billion. It has a price-earnings (P/E) ratio of 16.1, a forward P/E of 14.5, a price-book (P/B) ratio of 16.4 and a price-sales (P/S) ratio of 3.8.
GuruFocus ranked KLA-Tencor’s financial strength 5 of 10. It has high Piotroski F-Score and Altman Z-Score, indicating the company is financially healthy. Its return on invested capital (ROIC) outperforms its weighted average cost of capital (WACC). The company’s cash-debt ratio of 0.8 is below the industry median of 1.6.
GuruFocus ranked the company’s profitability and growth 6 of 10. It has an operating margin of 32.2% and a net margin of 23.6%. Its return on equity (ROE) of 156.7% and return on assets (ROA) of 14.8% outperform 100% and 93% of other companies in the global semiconductor equipment and materials industry. Its return on capital (ROC) of 118.9% outperforms 97% of other companies.
PRIMECAP Management (Trades, Portfolio) is the company’s largest shareholder among the gurus with 8.5% of outstanding shares, which is 1.03% of their total assets managed.
The DCF Calculator gives the stock a fair value of $48.05 with a -50% margin of safety; it was trading at $72.3 on Monday.
Dodson purchased 80,000 shares in Alliance Data Systems Corp. (ADS, Financial) for $213.31 per share. The transaction had an impact of 2.3% on the portfolio.
Alliance provides transaction-based, data-driven marketing and loyalty solutions to its customers in a variety of industries. The company has a market cap of $12.2 billion with an enterprise value of $22.6 billion. It has a P/E of 26.2, a forward P/E of 11.03, a P/B of 7.1 and a P/S of 1.9.
GuruFocus ranked Alliance’s financial strength 4 of 10. It has a high Piotroski F-Score of 7 but a low Altman Z-Score of 1.5, which suggests the company is in minor danger of bankruptcy. The cash-debt ratio of 0.11 is below the industry median of 1.5.
GuruFocus ranked the company’s profitability and growth 9 of 10. It has an operating margin of 19.5% and a net margin of 8.8%. Its ROE of 25.13% outperforms 85% of other companies in the global business services industry. Its ROA of 2.8% and ROC of 13.01% underperform 55% and 61% of other companies in the industry.
Jeff Ubben (Trades, Portfolio) is the company’s largest shareholder among the gurus with 5.6% of outstanding shares, which is 5.8% of his total assets managed.
The DCF Calculator gives the stock a fair value of $198.46 with a -5% margin of safety; it was trading at $208.63 on Monday.
Dodson sold out of Perrigo Co. PLC (PRGO, Financial). He sold 135,750 shares for $92.15 per share. The transaction had an impact of -1.8% on the portfolio.
Perrigo develops and sells over-the-counter and generic prescription pharmaceuticals, nutritional products and active pharmaceutical ingredients. It has a market cap of $12.4 billion with an enterprise value of $18.14 billion. It has a forward P/E of 11.3, a P/B of 1.3 and a P/S of 2.2.
GuruFocus ranked the company’s financial strength 4 of 10. Its Piotroski F-Score of 4 indicates it is in stable financial condition. Its Altman Z-Score suggests it has a mild possibility of bankruptcy. The cash-debt ratio of 0.1 is far below the industry median of 3.02.
GuruFocus ranked Perrigo’s profitability and growth 6 of 10. It has an operating margin of 0.5% and a net margin of -2.4%. Its ROE of -1.3% and ROA of -0.7% underperform 71% and 69% of other companies in the global drug manufacturers-specialty and generic industry. Its ROC of 1.6% underperforms 69% of its competitors.
Manning & Napier Advisors Inc. is Perrigo’s largest shareholder among the gurus with 1.6% of outstanding shares, which is 1.24% of its total assets managed.
Dodson has had this holding since the fourth quarter of 2015.
The DCF Calculator gives the stock a fair value of $-10.17; it was trading at $86.23 on Monday.
The guru sold out of American Express Co. (AXP, Financial). He sold 300,000 shares for $64.24 per share. The transaction had an impact of -2.7% on the portfolio.
American Express, which offers payments, network and travel services, has a market cap of $55.5 billion with an enterprise value of $74.7 billion. It has a P/E of 10.57, a forward P/E of 10.6, a P/B of 2.7 and a P/S of 1.8.
GuruFocus ranked American Express’ financial strength 6 of 10. Its Piotroski F-Score of 5 suggests a stable financial condition. Its ROIC is outperforming its WACC. The company’s cash-debt ratio of 0.6 is far below the industry median of 78.1.
GuruFocus ranked the company’s profitability and growth 8 of 10. It has an operating margin of 26.1% and a net margin of 17.04%. The ROE of 26.01% and ROA of 3.5% outperform 91% and 62% of other companies in the global credit services industry.
Warren Buffett (Trades, Portfolio) is the company’s largest shareholder with 16.4% of outstanding shares, which is 7.1% of his total assets managed.
Dodson has been reducing his holding since the second quarter.
The DCF Calculator gives the stock a fair value of $75.68 with a 21% margin of safety; it was trading at $60.09 on Monday.
Disclosure: I do not own stock in any companies mentioned in the article.
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