T Rowe Price Equity Income Fund (Trades, Portfolio) manager John Linehan disclosed on Tuesday that he initiated a position in Sempra Energy (SRE, Financial) during the first quarter.
The fund invested in 430,000 shares for an average price of $107.89 per share. With this transaction, Linehan stretched the portfolio 0.24%.
Company background
The San Diego, California-based company distributes liquefied natural gas and electricity in Southern California. On April 10, Sempra announced several executive changes as part of its leadership succession plan following current CEO Debra Reed’s retirement, including a new CEO, president, chief financial officer, chief operating officer and chief strategy officer.
Sempra Energy’s financial strength ranks a poor 4 out of 10 as the company’s debt-to-equity ratio and debt-to-EBITDA ratio are near 10-year highs and rank lower than over two-thirds of global competitors. Sempra’s debt-to-EBITDA ratio of 5.13 exceeds Joel Tillinghast’s safe threshold of 4, suggesting the company has trouble paying off its debt. Additionally, Sempra’s long-term debt increased 36.07% over the past three years according to the All-in-one Guru Screener.
GuruFocus ranks Sempra’s profitability 6 out of 10. Although the company’s operating margin is near a 10-year high of 20.79%, Sempra’s return on equity is near a 10-year low of 1.95% and underperforms 79% of global competitors.
Guru divests Apple and Macy’s
During the quarter, Linehan eliminated his position in Apple Inc. (AAPL, Financial), a major holding of Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial) CEO Warren Buffett (Trades, Portfolio). The T. Rowe Price Group Inc. (TROW, Financial) fund manager sold his 230,000 shares for an average price of $172.19 per share.
Linehan also sold his 1.31 million shares of Macy’s Inc. (M, Financial) for an average price of $26.98 per share. The fund manager boosted his positions in Franklin Resources Inc. (BEN, Financial) and CVS Health Corp. (CVS, Financial) with some of the proceeds. According to a previous article, Parnassus Fund manager Jerome Dodson (Trades, Portfolio) initiated a position in CVS during the quarter.
Disclosure: No positions.
