(GuruFocus, November 19) Mutual funds in Dodge & Cox are managed by an Investment Policy Committee, which currently consists of nine members. Rather than singling out an individual, GuruFocus track the fund under “Dodge & Cox”. The firm manages Dodge & Cox Stock Fund, Global Stock Fund, International Stock Fund, Balanced Stock Fund, and Income Fund.
The flagship Dodge & Cox Stock Fund was founded in 1965 and currently manages about $40 billion (about half of the firm’s total equity). It has to be one of the oldest Fund and also one of the largest around.
The long term performances of the Stock Fund have been very good, returning 5.97 and 10.36% for the last 10 and 20 years respectively, beating S&P 500’s -0.15 and 8.00% during the same periods. Short term, one just have to say they had their seven fat years and was having lean years during the 2007 to 2008 period. Here is a yearly return table as compared to benchmark:
But the fund’s fortune has since turned this year. Year-to-date (November 18, 2009), the fund returned 29.19% compared to S&P 500’s 22.87%. We wish the Fund’s winning streak will continue.
As of September 30, 2009, this is domestic equity asset allocation of the Dodge and Cox.
Notice the heavy weighting on Healthcare sector. The Fund Managers have the following to say about the sector in the Fund’s Quarterly Report:
Here are the top holding of the firm’s mutual funds:
No. 1: HewlettPackard Company (HPQ, Financial), Weightings: 4.42% - 73,818,728 Shares
Hewlett Packard is one of the leading global providers of computing and imaging solutions and services for business and home. The company is focused on capitalizing on the opportunities of the Internet and the proliferation of electronic services. Its major businesses include Imaging and Printing Systems, Computing Systems and Information Technology Services Hewlettpackard Company has a market cap of $119.69 billion; its shares were traded at around $50.48 with a P/E ratio of 13.5 and P/S ratio of 1. The dividend yield of Hewlettpackard Company stocks is 0.6%. Hewlettpackard Company had an annual average earning growth of 25.8% over the past 5 years.
No. 2: Novartis AG (NVS, Financial), Weightings: 4.18% - 65,401,863 Shares
Novartis AG is committed to improving health and well-being through innovative products and services. The company aspires to capture and hold a leadership position in all of their businesses with a strong, sustainable performance based on continuous innovation. Their long-term success is founded on meeting the expectations of all our stakeholders - their customers, their people, their shareholders and the communities in which they live and work. Novartis Ag has a market cap of $122.03 billion; its shares were traded at around $53.73 with a P/E ratio of 16.1 and P/S ratio of 3. The dividend yield of Novartis Ag stocks is 2.7%. Novartis Ag had an annual average earning growth of 8.9% over the past 10 years.
No. 3: Schlumberger Ltd. (SLB, Financial), Weightings: 3.88% - 51,322,416 Shares
Schlumberger Limited is a global technology services company consisting of two business segments, Schlumberger Oilfield Services and SchlumbergerSema. Schlumberger Oilfield Services is the leading provider of exploration and production services, solutions and technology to the international petroleum industry. SchlumbergerSema is a leading information technology services company providing a unique combination of domain expertise and global capabilities delivered on a local basis. Schlumberger Ltd. has a market cap of $79.91 billion; its shares were traded at around $66.71 with a P/E ratio of 21.2 and P/S ratio of 3. The dividend yield of Schlumberger Ltd. stocks is 1.2%. Schlumberger Ltd. had an annual average earning growth of 58.5% over the past 5 years.
No. 4: GlaxoSmithKline plc (GSK, Financial), Weightings: 3.37% - 67,266,971 Shares
GlaxoSmithKline is one of the world's leading research based pharmaceutical and healthcare companies and is committed to improving the quality of human life by enabling people to do more, feel better and live longer. They also have leadership in four major therapeutic areas: anti-infectives, central nervous system (CNS), respiratory and gastro-intestinal/metabolic. Glaxosmithkline Plc has a market cap of $108.31 billion; its shares were traded at around $41.75 with a P/E ratio of 11.9 and P/S ratio of 2.5. The dividend yield of Glaxosmithkline Plc stocks is 4.4%. Glaxosmithkline Plc had an annual average earning growth of 8.4% over the past 10 years. GuruFocus rated Glaxosmithkline Plc the business predictability rank of 3-star.
No. 5: News Corp. (NWS-A), Weightings: 3.09% - 203,032,030 Shares
NEWS CORPORATION is a diversified entertainment company with operations in eight industry segments: filmed entertainment; television; cable network programming; direct broadcast satellite television; magazines and inserts; newspapers and information services; book publishing; and other. The activities of News Corporation are conducted principally in the United States Continental Europe the United Kingdom Australia Asia and the Pacific Basin. News Corp. has a market cap of $15.45 billion; its shares were traded at around $0 with a P/E ratio of 6.86 and P/S ratio of 0.47. The dividend yield of News Corp. stocks is 1.41%. News Corp. had an annual average earning growth of 17.2% over the past 5 years.
No. 6: Comcast Corp. (CMCSA, Financial), Weightings: 2.95% - 137,371,726 Shares
Comcast Corp., among the world's leading communication companies, provides basic cable, digital cable and high speed internet services that connect people to what's important in their lives. They are in the process of deploying digital video applications and high-speed Internet access service to expand the products available on their cable communications networks. Comcast Corp. has a market cap of $43.42 billion; its shares were traded at around $15.13 with a P/E ratio of 13.2 and P/S ratio of 1.3. The dividend yield of Comcast Corp. stocks is 1.7%. Comcast Corp. had an annual average earning growth of 9.6% over the past 10 years.
Conclusion
When the money you manage are measured by tens of billions, like Warren Buffett and fellows at Dodge & Cox, you have to hunt for the elephant. No small caps here. The only hope to beat the market is to bet on the sector that present more value than the overall market. As of now, Dodge & Cox managers found value in Healthcare sector.
GuruFocus provides real time information and insights of Investment Gurus such as Warren Buffett and Dodge & Cox managers for Premium Members. If you are not a premium member, click here to sign up or upgrade. 7-Day Free Trial is available.
The flagship Dodge & Cox Stock Fund was founded in 1965 and currently manages about $40 billion (about half of the firm’s total equity). It has to be one of the oldest Fund and also one of the largest around.
The long term performances of the Stock Fund have been very good, returning 5.97 and 10.36% for the last 10 and 20 years respectively, beating S&P 500’s -0.15 and 8.00% during the same periods. Short term, one just have to say they had their seven fat years and was having lean years during the 2007 to 2008 period. Here is a yearly return table as compared to benchmark:
| Year | Return (%) | S&P500 (%) | Excess Gain (%) |
|---|---|---|---|
| 2008 | -43.41 | -37 | -6.4 |
| 2007 | 0.14 | 5.61 | -5.5 |
| 2006 | 18.52 | 15.79 | 2.7 |
| 2005 | 9.36 | 4.91 | 4.4 |
| 2004 | 19.16 | 12 | 7.2 |
| 2003 | 32.35 | 28.7 | 3.6 |
| 2002 | -10.52 | -22.1 | 11.6 |
| 2001 | 9.33 | -11.9 | 21.2 |
| 2000 | 16.3 | -9.1 | 25.4 |
| 1999 | 20.2 | 21 | -0.8 |
But the fund’s fortune has since turned this year. Year-to-date (November 18, 2009), the fund returned 29.19% compared to S&P 500’s 22.87%. We wish the Fund’s winning streak will continue.
As of September 30, 2009, this is domestic equity asset allocation of the Dodge and Cox.
| Industry | 2009-06-30 | 2009-09-30 |
|---|---|---|
| Technology | 15% | 15.6% |
| Financials | 10.4% | 11.6% |
| Utilities | 0% | 0% |
| Telecommunications | 3% | 4.2% |
| Consumer Services | 19.2% | 19% |
| Health Care | 24.9% | 21.8% |
| Consumer Goods | 4% | 3.3% |
| Industrials | 9.3% | 10.8% |
| Basic Materials | 1.7% | 2.3% |
| Oil & Gas | 12.3% | 10.9% |
Notice the heavy weighting on Healthcare sector. The Fund Managers have the following to say about the sector in the Fund’s Quarterly Report:
The health care sector of the U.S. economy has been getting significant attention lately, due to the well publicized movement for government reform in some fashion. In our view, the cloud of uncertainty hanging over the sector is giving us the opportunity to invest in solid business franchises in pharmaceuticals, medical devices, and services at their lowest valuations in decades. Our fundamental research and stock selection process continues to be “bottom-up” oriented, focused on the long-term outlook for and valuation of individual companies. We develop a range of potential outcomes, incorporating downside risk and upside potential, for each company’s profits and cash flow. As we assess the possible impact of U.S. health care reform, we believe current stock prices for many leading companies reflect a fairly pessimistic scenario and may not reflect positive developments. For example, technological innovation will continue to drive advancements in medical products and services. We also believe the developing world is likely to be a source of significant long-term incremental growth,
as more resources are dedicated to modern health care.
As of September 30, 2009, 23.1% of the Fund was invested in the Health Care sector, compared to 13.1% in the S&P 500, which was the Fund’s largest sector overweight. This year we built a significant position in Merck, one of the ten largest pharmaceutical companies in the world. Like most pharmaceutical companies, Merck faces the challenges of patent expirations, generic competition, and possible new drug pipeline disappointments. However, we believe Merck is an attractive holding because of its low valuation, historically productive research labs, strong patent franchises, and considerable cost reduction opportunities, including synergies from its pending acquisition of Schering-Plough.
Here are the top holding of the firm’s mutual funds:
No. 1: HewlettPackard Company (HPQ, Financial), Weightings: 4.42% - 73,818,728 Shares
Hewlett Packard is one of the leading global providers of computing and imaging solutions and services for business and home. The company is focused on capitalizing on the opportunities of the Internet and the proliferation of electronic services. Its major businesses include Imaging and Printing Systems, Computing Systems and Information Technology Services Hewlettpackard Company has a market cap of $119.69 billion; its shares were traded at around $50.48 with a P/E ratio of 13.5 and P/S ratio of 1. The dividend yield of Hewlettpackard Company stocks is 0.6%. Hewlettpackard Company had an annual average earning growth of 25.8% over the past 5 years.
No. 2: Novartis AG (NVS, Financial), Weightings: 4.18% - 65,401,863 Shares
Novartis AG is committed to improving health and well-being through innovative products and services. The company aspires to capture and hold a leadership position in all of their businesses with a strong, sustainable performance based on continuous innovation. Their long-term success is founded on meeting the expectations of all our stakeholders - their customers, their people, their shareholders and the communities in which they live and work. Novartis Ag has a market cap of $122.03 billion; its shares were traded at around $53.73 with a P/E ratio of 16.1 and P/S ratio of 3. The dividend yield of Novartis Ag stocks is 2.7%. Novartis Ag had an annual average earning growth of 8.9% over the past 10 years.
No. 3: Schlumberger Ltd. (SLB, Financial), Weightings: 3.88% - 51,322,416 Shares
Schlumberger Limited is a global technology services company consisting of two business segments, Schlumberger Oilfield Services and SchlumbergerSema. Schlumberger Oilfield Services is the leading provider of exploration and production services, solutions and technology to the international petroleum industry. SchlumbergerSema is a leading information technology services company providing a unique combination of domain expertise and global capabilities delivered on a local basis. Schlumberger Ltd. has a market cap of $79.91 billion; its shares were traded at around $66.71 with a P/E ratio of 21.2 and P/S ratio of 3. The dividend yield of Schlumberger Ltd. stocks is 1.2%. Schlumberger Ltd. had an annual average earning growth of 58.5% over the past 5 years.
No. 4: GlaxoSmithKline plc (GSK, Financial), Weightings: 3.37% - 67,266,971 Shares
GlaxoSmithKline is one of the world's leading research based pharmaceutical and healthcare companies and is committed to improving the quality of human life by enabling people to do more, feel better and live longer. They also have leadership in four major therapeutic areas: anti-infectives, central nervous system (CNS), respiratory and gastro-intestinal/metabolic. Glaxosmithkline Plc has a market cap of $108.31 billion; its shares were traded at around $41.75 with a P/E ratio of 11.9 and P/S ratio of 2.5. The dividend yield of Glaxosmithkline Plc stocks is 4.4%. Glaxosmithkline Plc had an annual average earning growth of 8.4% over the past 10 years. GuruFocus rated Glaxosmithkline Plc the business predictability rank of 3-star.
No. 5: News Corp. (NWS-A), Weightings: 3.09% - 203,032,030 Shares
NEWS CORPORATION is a diversified entertainment company with operations in eight industry segments: filmed entertainment; television; cable network programming; direct broadcast satellite television; magazines and inserts; newspapers and information services; book publishing; and other. The activities of News Corporation are conducted principally in the United States Continental Europe the United Kingdom Australia Asia and the Pacific Basin. News Corp. has a market cap of $15.45 billion; its shares were traded at around $0 with a P/E ratio of 6.86 and P/S ratio of 0.47. The dividend yield of News Corp. stocks is 1.41%. News Corp. had an annual average earning growth of 17.2% over the past 5 years.
No. 6: Comcast Corp. (CMCSA, Financial), Weightings: 2.95% - 137,371,726 Shares
Comcast Corp., among the world's leading communication companies, provides basic cable, digital cable and high speed internet services that connect people to what's important in their lives. They are in the process of deploying digital video applications and high-speed Internet access service to expand the products available on their cable communications networks. Comcast Corp. has a market cap of $43.42 billion; its shares were traded at around $15.13 with a P/E ratio of 13.2 and P/S ratio of 1.3. The dividend yield of Comcast Corp. stocks is 1.7%. Comcast Corp. had an annual average earning growth of 9.6% over the past 10 years.
Conclusion
When the money you manage are measured by tens of billions, like Warren Buffett and fellows at Dodge & Cox, you have to hunt for the elephant. No small caps here. The only hope to beat the market is to bet on the sector that present more value than the overall market. As of now, Dodge & Cox managers found value in Healthcare sector.
GuruFocus provides real time information and insights of Investment Gurus such as Warren Buffett and Dodge & Cox managers for Premium Members. If you are not a premium member, click here to sign up or upgrade. 7-Day Free Trial is available.
