Fisher Investments leader Ken Fisher (Trades, Portfolio) disclosed his third-quarter portfolio on Tuesday, listing 79 new positions.
According to its website, the guru’s Camas, Washington-based firm invests in the countries and sectors most likely to generate the highest expected returns. It uses a framework called The Four Market Conditions to help determine the appropriate investment strategy for the current environment.
For the quarter, the firm’s five largest new positions were Adobe Inc. (ADBE, Financial), Cleveland-Cliffs Inc. (CLF, Financial), Diamond Offshore Drilling Inc. (DO, Financial), the iShares MSCI Global Select Metals & Mining Producers exchange-traded fund (PICK, Financial) and Rowan Companies PLC (RDC, Financial).
Adobe
Fisher invested in 408,693 shares of Adobe for an average price of $257.68 per share, allocating 0.13% of the equity portfolio to the holding. He previously exited a position in the stock in the first quarter of 2013.
The San Jose, California-based software company has a market cap of $120.25 billion; its shares were trading around $244.96 on Wednesday with a price-earnings ratio of 50.61, a price-book ratio of 13.55 and a price-sales ratio of 14.25.
The Peter Lynch chart shows the stock is trading higher than its fair value, suggesting it is overpriced.
GuruFocus rated Adobe’s financial strength 8 out of 10, supported by good interest coverage and a high Altman Z-Score of 13.12, which indicates the company is in good financial standing. The company’s profitability and growth scored a 9 out of 10 rating as a result of strong margins and returns, a high Piotroski F-Score of 8, which suggests operations are stable, and a business predictability rank of 2.5 out of five stars. GuruFocus says companies with this rating not only have consistent revenue and earnings growth, but typically see their stock prices gain an average of 7.3% per year.
Of the gurus invested in Adobe, PRIMECAP Management (Trades, Portfolio) has the largest position with 4.42% of outstanding shares. Other guru shareholders include Frank Sands (Trades, Portfolio), Steve Mandel (Trades, Portfolio), Spiros Segalas (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Lee Ainslie (Trades, Portfolio) and Daniel Loeb (Trades, Portfolio).
Cleveland-Cliffs
Having divested of a holding in Cleveland-Cliffs in the first quarter of 2013, the guru established a new 8.5 million-share stake for an average of $10.29 per share, dedicating 0.13% of the equity portfolio to the position.
The iron ore mining company, which is headquartered in Cleveland, has a $3.12 billion market cap; its shares were trading around $10.46 on Wednesday with a price-earnings ratio of 6.93 and a price-sales ratio of 1.20.
According to the Peter Lynch chart, the stock is undervalued since it is trading below its fair value.
As a result of poor interest coverage and declining revenue per share, Cleveland-Cliffs financial strength was rated 4 out of 10 by GuruFocus. In addition, the Altman Z-Score of 0.9 indicates the company is in danger of going bankrupt. The company’s profitability and growth fared a bit better, scoring a 6 out of 10 rating. While the company’s margins are declining, they still outperform a majority of competitors. The company also has a high Piotroski F-Score of 8 and a one-star business predictability rank. According to GuruFocus, companies with this rank typically see their stock prices gain an average of 1.1% per year.
Andreas Halvorsen (Trades, Portfolio) is the company’s largest guru shareholder with 0.87% of outstanding shares. Ray Dalio (Trades, Portfolio)’s Bridgewater Associates, Chuck Royce (Trades, Portfolio), Leon Cooperman (Trades, Portfolio), Hotchkis & Wiley, Louis Moore Bacon (Trades, Portfolio), Murray Stahl (Trades, Portfolio) and Joel Greenblatt (Trades, Portfolio) also have positions in the stock.
Diamond Offshore Drilling
The investor picked up 879,636 shares of Diamond Offshore Drilling for an average price of $18.37 per share, giving it 0.02% space in the equity portfolio. He previously sold out of the stock in the fourth quarter of 2010.
The Houston-based offshore drilling contractor has a $2 billion market cap; its shares were trading around $14.55 on Wednesday with a price-book ratio of 0.54 and a price-sales ratio of 1.57.
Based on the median price-sales chart, the stock appears to be trading below its historical value.
Weighed down by poor interest coverage, Diamond Offshore’s financial strength is rated by GuruFocus at 5 out of 10. In addition, the Altman Z-Score of 1.24 warns that the company is at risk of bankruptcy. The company’s profitability and growth was rated 4 out of 10. Although its margins are declining, however, they still outperform industry peers. It also has a weak Piotroski F-Score of 3 and a one-star business predictability rank, which is on watch as a result of declining revenue per share.
With his purchase of 0.64% of the company’s outstanding shares, Fisher became the company’s largest guru shareholder. Royce, Steven Cohen (Trades, Portfolio), Arnold Van Den Berg (Trades, Portfolio), Greenblatt, Hotchkis & Wiley, Jim Simons' (Trades, Portfolio) Renaissance Technologies, Stahl, Jeremy Grantham (Trades, Portfolio), Pioneer, Paul Tudor Jones (Trades, Portfolio) and Barrow, Hanley, Mewhinney & Strauss also own the stock.
iShares MSCI Global Select Metals & Mining Producers
Fisher also established a position in the iShares MSCI Global Select Metals & Mining Producers ETF, buying 401,067 units for an average price of $31.63 per unit. The trade had an impact of 0.02% on the equity portfolio.
The ETF, which tracks the performance of an index of mining stocks, excluding gold and silver, has a market cap of $319 million; its units were trading around $29.53 on Wednesday with a price-earnings ratio of 10.63 and a price-book ratio of 1.37. The 14-day relative strength index is 35.24, which means it is nearing oversold levels.
Rowan Companies
After selling out of Rowan Companies in the second quarter of 2012, the guru purchased a new 749,675-share holding for an average price of $14.98 per share. The position was given 0.02% space in the equity portfolio.
The offshore drilling contractor, which is based in Houston, has a market cap of $2.07 billion; its shares were trading around $16.42 on Wednesday with a price-book ratio of 0.38 and a price-sales ratio of 2.
The median price-sales chart shows the stock is trading slightly below its historical value.
Rowan Companies’ financial strength and profitability and growth were both rated 5 out of 10 by GuruFocus. The Altman Z-Score of 1.39 suggests the company is at risk of bankruptcy. The company also has a declining operating margin, a low Piotroski F-Score of 3, which implies poor business conditions, and a one-star business predictability rank. The rank is on watch because the company has posted declining revenue per share over the last five years.
With 1.74% of outstanding shares, First Pacific Advisors (Trades, Portfolio) is the company’s largest guru shareholder. Other gurus with positions in the stock include the FPA Capital Fund (Trades, Portfolio), Richard Pzena (Trades, Portfolio), Cohen, Simons, Ainslie, Greenblatt, Mario Gabelli (Trades, Portfolio), Hotchkis & Wiley, Grantham, Pioneer and Royce.
Other trades
During the quarter, Fisher also started positions in Noble Corp. PLC (NE, Financial), Transocean Ltd. (RIG, Financial), Eros Resources Corp. (BPUZF, Financial), Paychex Inc. (PAYX, Financial), Southwest Airlines Co. (LUV, Financial) and many other companies.
The guru’s $82.16 billion portfolio, which is composed of 827 stocks, is largely invested in the technology sector, followed by the financial services and health care sectors.
Disclosure: No positions.
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