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James Li
James Li
Articles (227)  | Author's Website |

David Carlson Adds 3 Positions in 1st Quarter

Guru reports quarterly portfolio

May 18, 2017 | About:

David Carlson (Trades, Portfolio), manager of Elfun Trusts, invests in companies that have potential to increase net income and dividends. During the first quarter, the guru added positions in Applied Materials Inc. (NASDAQ:AMAT), Starbucks Corp. (NASDAQ:SBUX) and Pioneer Natural Resources Co. (NYSE:PXD).

Applied Materials

Carlson invested in 600,000 shares of Applied Materials, a major supplier of semiconductor manufacturing equipment. The company’s share price averaged $35.91 during the quarter.

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Applied Materials has a financial strength rank of 7 and a profitability rank of 8, both suggesting good growth and income potential. The Santa Clara, California-based semiconductor company’s margins and returns are near a 10-year high and outperform over 90% of global competitors.

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For the quarter ending Jan. 29, Applied Materials reported an 86% year-over-year increase in new orders and a 45% year-over-year increase in net sales, setting “new records” according to CEO Gary Dickerson. The CEO praised the company for beginning fiscal 2017 strong and delivering earnings results that “maintain [Applied Materials’] trajectory of sustainable growth.”

Applied Materials continued its strong earnings momentum for the quarter ending April 30 with $3.55 billion in net sales and 76 cents in earnings per share. Dickerson reported the company “delivered the highest quarterly revenue and earnings in [the company’s] history” and set new earnings records for four straight quarters.

Starbucks

Carlson added 280,000 shares of Starbucks, a major global coffee marketer and retailer. The company’s share price averaged $56.59 during the quarter.

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As discussed in a previous article, Starbucks accelerated its global sales during the fiscal quarter ending April 2. The company reinforced the strong revenue growth in the quarterly report filing: segment revenues increased 8% in the Americas and 13% in China / Asia Pacific. Company management expects full-year 2017 revenue growth of approximately 8%, driven by expected improvements in global comparable sale stores in the second half of fiscal 2017. Expected full-year 2017 earnings range from $2.06 to $2.10 per share.

Starbucks has four positive investing signs, including consistent per-share revenue growth, a dividend yield close to a 10-year high and a price-sales ratio near a two-year low. The company’s Piotroski F-score ranks an excellent 8 out of 9, driven by consistent year-over-year gross margin growth over the past 10 quarters.

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Starbucks also has solid financial strength, including an Altman Z-score of 9.25 and a Beneish M-score of -2.91. The company has almost no financial distress.

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Pioneer Natural Resources

Carlson added 50,000 shares of Pioneer Natural Resources at an average price of $185.50 per share.

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The Irving, Texas-based oil exploration and production company has a good profitability rank of 7 despite declining revenue per share and gross margins. Even though the company reported a first-quarter net loss, Pioneer Natural Resources still expects good growth for 2017. Quarterly oil production increased about 3% from the prior quarter, the eighth consecutive quarter of production growth since the 2014 oil crisis. Management expects full-year 2017 oil production to increase 15% to 18% compared to that of 2016, driven by double-digit production growth from the company’s Spraberry / Wolfcamp horizontal drilling program.

Pioneer Natural Resources has margins and returns that outperform over 65% of global competitors, suggesting higher growth potential than other energy companies.

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Disclosure: The author has no positions in the companies mentioned.

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About the author:

James Li
I am an editorial assistant and researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

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