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Sydnee Gatewood
Sydnee Gatewood
Articles (956) 

Jerome Dodson Buys 5 New Stocks in 4th Quarter

Guru’s largest new position is Cadence Design Systems

Jerome Dodson (Trades, Portfolio), leader of Parnassus Investments, released his fourth-quarter portfolio this week, listing five new holdings.

With the goal of capital appreciation, the guru’s San Francisco-based firm invests across the capitalization spectrum in discounted companies that have strong competitive advantages, relevant products or services that will compound growth over the long term and quality management teams. Dodson is also known for being socially responsible, which means he takes the business' environmental and societal impacts into account. 

Based on these criteria, the guru’s Parnassus Fund established positions in Cadence Design Systems Inc. (NASDAQ:CDNS), Cerner Corp. (NASDAQ:CERN), Old Dominion Freight Lines Inc. (NASDAQ:ODFL), Nvidia Corp. (NASDAQ:NVDA) and Adobe Inc. (NASDAQ:ADBE).

Cadence Design Systems

Having previously sold out of Cadence Design in the second quarter of 2008, Dodson bought a new 592,966-share position for an average price of $43.36 per share. The trade expanded the equity portfolio 3.13%.

The California-based software company has a $12.91 billion market cap; its shares were trading around $45.87 on Friday with a price-earnings ratio of 55.11, a price-book ratio of 10.26 and a price-sales ratio of 6.22.

The Peter Lynch chart shows the stock is trading higher than its fair value, suggesting it is overpriced.

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GuruFocus rated Cadence’s financial strength 7 out of 10, supported by adequate interest coverage and a high Altman Z-Score of 9.6, which indicates the company is in good fiscal standing. The company’s profitability and growth scored an 8 out of 10 rating, driven by operating margin expansion, strong returns, a moderate Piotroski F-Score of 6, which means conditions are stable, and a business predictability rank of one out of five stars. According to GuruFocus, companies with this rank typically see their stocks gain an average of 1.1% per year.

Of the gurus invested in Cadence Design, Jim Simons (Trades, Portfolio)’ Renaissance Technologies has the largest stake with 0.55% of outstanding shares. Dodge & Cox, Pioneer Investments (Trades, Portfolio), Lee Ainslie (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Caxton Associates (Trades, Portfolio) are also shareholders.

Cerner

The guru invested in 412,037 shares of Cerner for an average price of $57.69 per share, dedicating 2.62% of the equity portfolio to the position.

The health care information technology company, which is headquartered in Kansas City, Missouri, has a market cap of $17.59 billion; its shares were trading around $53.73 on Friday with a price-earnings ratio of 21.36, a price-book ratio of 3.47 and a price-sales ratio of 3.37.

According to the Peter Lynch chart, the stock is overvalued.

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Cerner’s financial strength was rated 7 out of 10 by GuruFocus, driven by a good cash-debt ratio and robust Altman Z-Score of 8.72. The company’s profitability and growth fared even better, scoring a 9 out of 10 rating. Despite the operating margin being in decline, it still outperforms 82% of competitors. In addition, the company is supported by a moderate Piotroski F-Score of 6 and a five-star business predictability rank, which is on watch as a result of a slowdown in revenue per share growth over the last 12 months. GuruFocus says companies with this coveted rank typically see their stocks gain an average of 12.1% per year.

With 3.45% of outstanding shares, the Vanguard Health Care Fund (Trades, Portfolio) is Cerner’s largest guru shareholder. Other gurus who hold the stock include Simons’ firm, Pioneer, Steven Cohen (Trades, Portfolio), Greenblatt, Jeff Auxier (Trades, Portfolio), Ainslie, PRIMECAP Management (Trades, Portfolio), First Pacific Advisors (Trades, Portfolio) and Mairs and Power (Trades, Portfolio).

Old Dominion Freight Lines

The investor picked up 145,901 shares of Old Dominion for an average price of $132.12 per share, allocating 2.18% of the equity portfolio to the holding.

The North Carolina-based less than truckload shipping company has a $10.65 billion market cap; its shares were trading around $134.31 on Friday with a price-earnings ratio of 16.64, a price-book ratio of 4.07 and a price-sales ratio of 2.72.

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

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GuruFocus rated Old Dominion’s financial strength 9 out of 10. In addition to having a comfortable level of interest coverage, the Altman Z-Score of 10.05 indicates the company is financially sound. The company’s profitability and growth scored a perfect 10, boosted by operating margin expansion, good returns, consistent revenue and earnings growth and a Piotroski F-Score of a perfect 9, which indicates business conditions are healthy. The company also has a five-star business predictability rank.

David Rolfe (Trades, Portfolio) is Old Dominion’s largest shareholder among the gurus with 0.56% of outstanding shares. Pioneer, PRIMECAP, Simons’ firm, Chuck Royce (Trades, Portfolio), Greenblatt and Ken Fisher (Trades, Portfolio) are also invested in the stock.

Nvidia

Dodson purchased 88,214 shares of Nvidia for an average price of $187.62 per share, giving it 2.18% space in the equity portfolio.

The semiconductor chip manufacturer, which is based in Santa Clara, California, has a market cap of $93.54 billion; its shares were trading around $155.13 on Friday with a price-earnings ratio of 20.50, a price-book ratio of 9.88 and a price-sales ratio of 7.74.

The Peter Lynch chart suggests the stock is overvalued.

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Nvidia’s financial strength was rated 8 out of 10 by GuruFocus, driven by adequate interest coverage and a robust Altman Z-Score of 17.43. The company’s profitability and growth scored a 9 out of 10 rating as a result of operating margin expansion, 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 stocks gain an average 1.1% per year.

With 1.13% of outstanding shares, PRIMECAP is the company’s largest guru shareholder. Spiros Segalas (Trades, Portfolio), Steve Mandel (Trades, Portfolio), Simons, Coatue Management LLC, Pioneer, Cohen, Fisher, Ron Baron (Trades, Portfolio), Jones, Mario Gabelli (Trades, Portfolio) and Murray Stahl (Trades, Portfolio) also own the stock.

Adobe

Having previously closed a position in Adobe in the second quarter of 2008, the guru opened a new 39,020-share holding for an average price of $240.15 per share. The trade had an impact of 1.07% on the equity portfolio.

The San Jose, California-based software company has a $120.96 billion market cap; its shares were trading around $247.80 on Friday with a price-earnings ratio of 47.56, a price-book ratio of 12.92 and a price-sales ratio of 13.64.

According to the Peter Lynch chart, the stock is overvalued.

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GuruFocus rated Adobe’s financial strength 7 out of 10. In addition to having sufficient interest coverage, the Altman Z-Score of 9.51 indicates the company is in good fiscal standing. The company’s profitability and growth scored a 9 out of 10 rating, boosted by an expanding operating margin, solid returns and a high Piotroski F-Score of 7. It also has a one-star business predictability rank.

Of the gurus invested in Adobe, PRIMECAP has the largest stake with 4.29% of outstanding shares. Other guru investors include Mandel, Frank Sands (Trades, Portfolio), Segalas, Pioneer, Coatue Management, Daniel Loeb (Trades, Portfolio), Ainslie, Chase Coleman (Trades, Portfolio) and Fisher.

Additional trades

Dodson also added to a number of holdings during the quarter, including Zayo Group Holdings Inc. (NYSE:ZAYO), FedEx Corp. (NYSE:FDX), Signature Bank (NASDAQ:SBNY), Cognizant Technology Solutions Corp. (NASDAQ:CTSH) and Air Lease Corp. (NYSE:AL), among others.

The guru’s $825 million equity portfolio, which consists of 34 stocks, is largely invested in the technology sector.

Disclosure: No positions.

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About the author:

Sydnee Gatewood
I am the editorial director 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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