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James Li
James Li
Articles (659)  | Author's Website |

Jerome Dodson’s Parnassus Fund Buys Trimble in 3rd Quarter

Fund starts 1 new position and boosts 3 others

October 12, 2018 | About:

Jerome Dodson (Trades, Portfolio), portfolio manager of the Parnassus Fund, disclosed this week that his fund established one new position during the third quarter: Trimble Inc. (NASDAQ:TRMB). The fund also increased its holdings of three companies: Nielsen Holdings PLC (NYSE:NLSN), Signature Bank (NASDAQ:SBNY) and eBay Inc. (NASDAQ:EBAY).

Managing an equity portfolio of 32 stocks, Dodson seeks to invest in out-of-favor companies with wide moats, relevancy over the long term and quality management teams that will act in the best interest of shareholders.

New buy: Trimble

The Parnassus Fund invested in 578,160 shares of Trimble for an average price of $39.07 per share, giving the position 2.56% portfolio space. Based on its Peter Lynch Chart, the stock is trading significantly above its median price-earnings valuation.

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Sunnyvale, California-based Trimble provides location-based solutions used in global positioning system, laser, optical and inertial technologies. The company’s financial strength ranks 6 out of 10: although the company has a strong Altman Z-score of 4.09, Trimble’s debt-to-EBITDA ratio of 2.52 ranks lower than 56% of global competitors. GuruFocus cautions that while Trimble’s debt level is still acceptable, the company has issued $642.9 million in long-term debt over the past three years.

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GuruFocus ranks Trimble’s profitability 8 out of 10 on several factors, including a strong Piotroski F-score of 7 and a Joel Greenblatt (Trades, Portfolio) return on capital that outperforms 98% of global competitors. The company’s business predictability ranks two stars out of five, suggesting moderately consistent revenue and earnings growth over the past 10 years.

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Nielson Holdings

The fund added 700,500 shares of Nielson Holdings for an average price of $26.92 per share. The fund manager increased his equity portfolio 1.98% with this transaction.

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Nielson Holdings offers marketing and client analytics services through two business segments: Buy and Watch. The former provides retail transactional measurement data while the latter collects and analyses media usage behavior data.

GuruFocus ranks the company’s financial strength 4 out of 10 on several warning signs, which include a weak Altman Z-score of 1.11 and a debt-to-EBITDA ratio of 4.91, which exceeds Joel Tillinghast’s safe threshold of 4. Despite this, Nielson’s profitability ranks 7 out of 10 primarily due to profit margins outperforming 85% of global competitors and increasing approximately 2.7% per year over the past five years.

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Signature Bank

The fund invested in 36,068 shares of Signature Bank for an average price of $117.82 per share, boosting the equity portfolio 0.42%.

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The Parnassus fund managers said in their semiannual letter that New York-based Signature Bank detracted from the portfolio during the second quarter on several headwinds, including losses from the bank’s taxi loan. Despite this, the fund managers still “take comfort” in the bank’s veteran management team and exemplary track record. Additionally, Dodson and co. said Signature’s revenue is expected to grow 6% for the year on “impressive loan growth” and that investors have overreacted to the share price.

eBay

The fund added 65,000 shares of eBay for an average price of $34.65 per share, increasing the portfolio 0.22%.

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San Jose, California-based eBay connects millions of buyers and sellers around the world, empowers people and creates opportunities through connected commerce. GuruFocus ranks the company’s profitability 6 out of 10 and lists three positive investing signs, which include a price-sales ratio near a three-year low, a price near its 52-week low and expanding operating margins.

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Other gurus with large holdings in eBay include Larry Robbins (Trades, Portfolio) and PRIMECAP Management (Trades, Portfolio).

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Disclosure: No positions.

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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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