The Parnassus Endeavor Fund (Trades, Portfolio) released its first-quarter portfolio this week, listing two new positions.
With the goal of capital appreciation, the fund, which is part of Jerome Dodson (Trades, Portfolio)’s Parnassus Investments, is interested in discounted, out-of-favor large-cap companies with strong competitive advantages, quality management teams and positive environmental, social and governance performances. Known for its stance on social and environmental responsibility, the San Francisco-based fund also looks for companies with good work environments and avoids investing in companies that produce, transport or sell fossil fuels.
Based on these criteria, the fund, which is managed by Dodson and Billy Hwan, established positions in AbbVie Inc. (ABBV, Financial) and Regeneron Pharmaceuticals Inc. (REGN, Financial) during the quarter.
AbbVie
Parnassus invested in 1.7 million shares of AbbVie, dedicating 3.64% of the equity portfolio to the stake. The stock traded for an average price of $82.08 per share during the quarter.
The Illinois-based biopharmaceutical company, which focuses on developing drugs in the immunology and oncology space, has a $113.80 billion market cap; its shares were trading around $76.81 on Thursday with a price-earnings ratio of 22.06 and a price-sales ratio of 3.58.
The Peter Lynch chart shows the stock is trading above its fair value, suggesting it is overpriced.
GuruFocus rated AbbVie’s financial strength 4 out of 10. As a result of issuing approximately $5.6 billion in new long-term debt over the last five years, the company has insufficient interest coverage. In addition, the Altman Z-Score of 2.13 indicates it is under some fiscal pressure.
The company’s profitability and growth fared much better, scoring an 8 out of 10 rating. It is supported by margins and returns that outperform competitors and a high Piotroski F-Score of 7, which implies operations are healthy.
Of the gurus invested in AbbVie, Pioneer Investments (Trades, Portfolio) has the largest position with 0.22% of outstanding shares. Other top guru shareholders include Ken Fisher (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Robert Bruce (Trades, Portfolio), Jim Simons' (Trades, Portfolio) Renaissance Technologies, Mairs and Power (Trades, Portfolio), the Eaton Vance Worldwide Health Sciences Fund (Trades, Portfolio), Leucadia National (Trades, Portfolio), Dodge & Cox, Murray Stahl (Trades, Portfolio), Jeff Auxier (Trades, Portfolio), Scott Black (Trades, Portfolio), Tom Russo (Trades, Portfolio), Mario Gabelli (Trades, Portfolio) and Ron Baron (Trades, Portfolio).
Regeneron Pharmaceuticals
The fund picked up 160,000 shares of Regeneron Pharmaceuticals, allocating 1.74% of the equity portfolio to the holding. During the quarter, shares traded for an average price of $411.49.
Headquartered in New York, the biotechnology company, which develops products that treat eye disease, cardiovascular disease, cancer and inflammation, has a $35.37 billion market cap; its shares traded around $322.19 on Thursday with a price-earnings ratio of 15.42, a price-book ratio of 3.98 and a price-sales ratio of 5.42.
According to the Peter Lynch chart, the stock is trading near its fair value.
Regeneron’s financial strength was rated 8 out of 10 by GuruFocus. In addition to having adequate interest coverage, the robust Altman Z-Score of 8.67 suggests the company is in good fiscal health.
The company’s profitability and growth scored a 9 out of 10 rating, driven by operating margin expansion, strong returns that outperform a majority of industry peers and a moderate Piotroski F-Score of 6, which indicates business conditions are stable. The company also has 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.
With 1.90% of outstanding shares, Frank Sands (Trades, Portfolio) is the company’s largest guru shareholder. The Vanguard Health Care Fund (Trades, Portfolio), Bill Nygren (Trades, Portfolio), Simons’ firm, Pioneer, Steven Cohen (Trades, Portfolio), Greenblatt, Leucadia, John Hussman (Trades, Portfolio), Fisher and Ray Dalio (Trades, Portfolio) also have positions in the stock.
Additional trades
During the quarter, the fund also added to its holdings of Biogen Inc. (BIIB, Financial), Perrigo Co. PLC (PRGO, Financial), Apple Inc. (AAPL, Financial), Mastercard Inc. (MA, Financial), Nvidia Corp. (NVDA, Financial), Capital One Financial Corp. (COF, Financial), Qualcomm Inc. (QCOM, Financial), International Business Machines Corp. (IBM, Financial) and Gilead Sciences Inc. (GILD, Financial).
Parnassus’ $3.77 billion equity portfolio, which is composed of 27 stocks, is largely invested in the technology sector with a weight of 43.14%. Securities in the health care space make up 22.51% of the portfolio.
According to GuruFocus data, the Endeavor Fund posted a -13.49% return in 2018, underperforming the S&P 500’s return of -4.38%.
Disclosure: No positions.
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