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James Li
James Li
Articles (757)  | Author's Website |

T Rowe Price Equity Income Fund Buys 6 Stocks in 1st Quarter

Top buys include Conagra and Fox spinoff

The T Rowe Price Equity Income Fund (Trades, Portfolio), part of T. Rowe Price Group Inc. (NASDAQ:TROW), disclosed this week its six new holdings for the first quarter were Conagra Brands Inc. (NYSE:CAG), Fox Corp. (NASDAQ:FOX), Pioneer Natural Resources Co. (NYSE:PXD), Zimmer Biomet Holdings Inc. (NYSE:ZBH), Equitrans Midstream Corp. (NYSE:ETRN) and Westinghouse Air Brake Technologies Corp. (NYSE:WAB).

Managed by John Linehan, the Baltimore-based fund seeks long-term capital appreciation through investments in undervalued companies with potential to pay above-average dividends. As of quarter-end, the $18.79 billion equity portfolio’s top three sectors in terms of portfolio weight are financial services, health care and energy.

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Conagra Brands

The fund invested in 7.54 million shares of Conagra Brands, giving the position 1.11% equity portfolio space. The stock traded for an average price of $22.9 per share during the quarter. 

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The Chicago-based company manufactures branded consumer foods like Hunt’s, Slim Jim and Reddi-wip. GuruFocus ranks the company’s profitability 4 out of 10 primarily due to a three-year revenue decline rate of 20.60%, a rate that underperforms 70% of global competitors. Despite this, Conagra Brands’ operating margin is near a 10-year high of 13.02% and outperforms 71.40% of global packaged foods companies.

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Fox

The fund disclosed a 3,930,003-share stake in Fox Corp, the standalone company formed through the pro rata distribution by Twenty-First Century Fox Inc. (NASDAQ:TFCF) in light of the merger with The Walt Disney Co. (NYSE:DIS). Shares of Fox averaged $38.11 during the quarter and occupy 0.75% of the fund’s equity portfolio.

Fox said in an April 8 press release that revenues for the three months ending Dec. 31 were $3.583 billion, up approximately $1.042 billion from the prior three months. Despite this, net income for the fourth quarter was just $24 million, driven by higher operating expenses; selling, general and administrative expenses; and other expenses.

Pioneer Natural Resources

The fund invested in 825,000 shares of Pioneer Natural Resources, giving the position 0.67% equity portfolio weight. The stock traded around an average price of $141.12 per share during the quarter. 

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The Irving, Texas-based company produces oil and natural gas throughout the southern U.S., focusing primarily on the Permian Basin and Eagle Ford Shale regions. GuruFocus ranks the company’s profitability 8 out of 10 on several positive signs, which include a strong Piotroski F-score of 7 and profit margins that are outperforming over 70% of global competitors.

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Zimmer Biomet Holdings

The fund invested in 275,000 shares of Zimmer Biomet Holdings, giving the position 0.19% equity portfolio space. During the quarter, the stock traded for an average price of $116.76 per share. 

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The Warsaw, Indiana-based company designs, manufactures and markets orthopedic reconstructive implants and other supplies used in orthopedic surgery. GuruFocus ranks the company’s profitability 7 out of 10, driven by net profit margins that outperform approximately 93% of global competitors and a return on equity that outperforms approximately 88% of global competitors. Despite this, Zimmer Biomet’s three-year Ebitda growth rate of -2.80% underperforms 53% of global medical devices companies.

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Equitrans Midstream

The fund invested in 1.425 million shares of Equitrans Midstream, giving the position 0.17% equity portfolio space. The stock traded around an average price of $20.03 per share during the quarter.

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The Pittsburgh-based company said on April 10 that EQM Midstream Partners LP (NYSE:EQM), a company where Equitrans has majority ownership of the limited partnership interest in, completed the acquisition of a 60% interest in Eureka Midstream and a 100% interest in Hornet Midstream for approximately $860 million in cash and $170 million in assumed pro rata debt.

Westinghouse

The fund invested in 75,596 shares of Westinghouse, giving the position 0.03% equity portfolio space. The stock traded for an average price of $72.15 during the quarter.

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The Wilmerding, Pennsylvania-based company provides value-added, technology-based products and services for the rail industry through two business segments: freight and transit. GuruFocus ranks the company’s profitability 8 out of 10 on several positive signs, which include consistent revenue growth and a strong Piotroski F-score of 8. The company’s business predictability ranks 2.5 stars out of five: Although the company has consistent revenue growth over the past 10 years, Westinghouse’s Ebitda has declined approximately 4.70% per year over the past three years, a rate that underperforms 70% of global competitors.

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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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