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Sydnee Gatewood
Sydnee Gatewood
Articles (738) 

David Rolfe Buys 3 Stocks in 3rd Quarter

Guru invests in 2 transportation companies and a beauty retailer

David Rolfe (Trades, Portfolio), Wedgewood Partners’ chief investment officer, released his third-quarter portfolio earlier this week, listing three new positions.

The guru, who manages the St. Louis-based firm’s portfolio, approaches a potential investment with the mindset of a business owner, evaluating a handful of undervalued companies that have a dominant product or service, have consistent earnings, revenue and dividend growth, are highly profitable and have strong management teams.

Based on these criteria, Rolfe established positions in Old Dominion Freight Lines Inc. (NASDAQ:ODFL), C.H. Robinson Worldwide Inc. (NASDAQ:CHRW) and Ulta Beauty Inc. (NASDAQ:ULTA) during the quarter.

Old Dominion Freight Lines

The guru invested in 457,407 shares of Old Dominion for an average price of $151.77 per share, dedicating 3.70% of the equity portfolio to the holding.

The North Carolina-based less-than-truckload shipping company has an $11.03 billion market cap; its shares were trading around $134.23 on Friday with a price-earnings ratio of 17.23, a price-book ratio of 4.19 and a price-sales ratio of 2.86.

The median price-sales chart shows the stock is trading higher than its historical value.

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Supported by comfortable interest coverage, GuruFocus rated Old Dominion’s financial strength 8 out of 10. The Altman Z-Score of 10.52 also suggests the company is in good fiscal standing. The company’s profitability and growth scored a 9 out of 10 rating, driven by an expanding operating margin, strong returns, a strong Piotroski F-Score of a perfect 9 and a business predictability rank of five out of five stars. In addition to having consistent earnings and revenue growth, GuruFocus says companies with this coveted rank typically see their stock prices gain an average of 12.1% per year.

With his purchase of 0.56% of the company’s outstanding shares, Rolfe became the company’s largest guru shareholder. Pioneer Investments (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies, Chuck Royce (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio) and Ken Fisher (Trades, Portfolio) also own the stock.

C.H. Robinson Worldwide

Rolfe picked up 684,020 shares of C.H. Robinson Worldwide for an average price of $93.82 per share, allocating 3.36% of the equity portfolio to the position.

The integrated shipping and logistics company, which is headquartered in Minnesota, has a market cap of $12.47 billion; its shares were trading around $90.68 on Friday with a price-earnings ratio of 20.29, a price-book ratio of 8.03 and a price-sales ratio of 0.78.

According to the Peter Lynch chart, the stock is overpriced since it is trading higher than its fair value.

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C.H. Robinson’s financial strength and profitability and growth were both rated 7 out of 10 by GuruFocus. Although the company has issued approximately $311.01 million in new long-term debt over the last three years, it is at a manageable level due to sufficient interest coverage. The high Altman Z-Score of 8.38 also indicates the company is financially sound. The company is supported by good returns, a high Piotroski F-Score of 7 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.

Of the gurus invested in C.H. Robinson, First Eagle Investment (Trades, Portfolio) has the largest position with 4.57% of outstanding shares. Mairs and Power (Trades, Portfolio), Simons, Pioneer, Greenblatt, Steven Cohen (Trades, Portfolio), John Hussman (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Ray Dalio (Trades, Portfolio), Yacktman Asset Management (Trades, Portfolio) and Caxton Associates (Trades, Portfolio) are also shareholders.

Ulta Beauty

The investor purchased 174,795 shares of Ulta for an average price of $254.81 per share, giving the holding 2.47% space in the equity portfolio.

The Illinois-based retailer of beauty products has an $18.76 billion market cap; its shares were trading around $313.32 on Friday with a price-earnings ratio of 30.51, a price-book ratio of 10.33 and a price-sales ratio of 3.03.

Based on the Peter Lynch chart, the stock appears to be overvalued.

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Ulta’s financial strength and profitability and growth were both rated 9 out of 10 by GuruFocus. Supported by comfortable interest coverage and no debt, the Altman Z-Score of 12.77 indicates the company is financially stable. The company also has an expanding operating margin, a high Piotroski F-Score of 7 and a five-star business predictability rank as a result of consistent earnings and revenue growth.

Simons’ firm has the largest holding of Ulta among the gurus with 0.77% of its outstanding shares. Primecap, Pioneer, Louis Moore Bacon (Trades, Portfolio), Greenblatt and Mario Gabelli (Trades, Portfolio) also have positions in the stock.

Additional trades

During the quarter, Rolfe also added to several holdings: AT&T Inc. (NYSE:T), BP PLC (NYSE:BP), Johnson & Johnson (NYSE:JNJ), Manning & Napier Inc. (NYSE:MN), The Toronto-Dominion Bank (NYSE:TD) and Verizon Communications Inc. (NYSE:VZ).

The guru’s $2 billion portfolio, which is composed of 36 stocks, is largely invested in the technology and financial services sectors. GuruFocus data shows Wedgewood slightly underperformed the S&P 500 in 2017 with a return of 20.42%. The index posted a 21.71% return.

Disclosure: No positions.

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About the author:

Sydnee Gatewood
I am an editorial assistant at GuruFocus. I have a BA in journalism and a MA in mass communications from Texas Tech University. I have lived in Texas most of my life, but also have roots in New Mexico and Colorado. Follow me on Twitter! @gurusydneerg

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