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James Li
James Li
Articles (1048)  | Author's Website |

FPA Capital Fund’s Top 5 Holdings as of June

Top holding is Denver-based energy company

According to current portfolio statistics, the FPA Capital Fund (Trades, Portfolio)’s top five holdings as of the June quarter are Cimarex Energy Co. (NYSE:XEC), InterDigital Inc. (NASDAQ:IDCC), Allegiant Travel Co. (NASDAQ:ALGT), Investors Bancorp Inc. (NASDAQ:ISBC) and Western Digital Corp. (NASDAQ:WDC).

Managed by Arik Ahitov, the Los Angeles-based fund seeks long-term capital appreciation through investments in stocks based on fundamental criteria, including strong balance sheets, free cash, an understandable business model and unique business characteristics.

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As of June, the $169 million equity portfolio contains 25 stocks, including one new position in Magellan Health Inc. (NASDAQ:MGLN). The fund’s top three sectors in terms of portfolio weight are technology, industrials and consumer discretionary, with weights of 21%, 20.89% and 18.99%.

Cimarex Energy

The fund owns 223,975 shares of Cimarex Energy, giving the position 7.86% weight in the equity portfolio. Shares averaged $64.03 during the second quarter.

Ahitov said in his March quarterly letter that several of the fund’s energy holdings detracted during fiscal 2018: The fund manager believed that the drop in oil prices was more due to “broad-based risk-off sentiment” than actual oil financials, and used the selloff as an opportunity to increase his exposure to the energy sector during fourth-quarter 2018. During the second quarter, the fund added 27,790 shares, increasing the holding 14.17%.

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GuruFocus ranks Cimarex Energy’s financial strength 5.3 out of 10: Even though the company has poor Piotroski F and Altman Z-scores, its debt-to-Ebitda ratio of 1.32 outperforms 72% of global competitors.

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Gurus with large holdings in Cimarex Energy include Diamond Hill Capital (Trades, Portfolio) and Charles de Vaulx.

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InterDigital

The fund owns 189,036 shares of InterDigital, giving the holding 7.20% equity portfolio weight. Shares averaged $66.69 during the second quarter.

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The Wilmington, Delaware-based company designs and develops technologies that enable and enhance wireless communications and capabilities. GuruFocus ranks InterDigital’s financial strength 6.2 out of 10: Even though the company’s interest coverage of 0.89 underperforms 91.92% of global competitors, it has a solid Altman Z-score of 3.85 and cash-debt ratio of 2.47, a ratio that outperforms 72.81% of global communication service competitors.

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Allegiant

The fund owns 80,841 shares of Allegiant, giving the position 6.86% equity portfolio space. Shares averaged $140.03 during the June quarter.

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The Las Vegas-based airline sells air transportation both on a standalone basis and bundled with other air-related products. GuruFocus ranks Allegiant’s profitability 8 out of 10 on several positive indicators, which include a five-star business predictability rank and profit margins that are outperforming over 85% of global competitors.

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2019 GuruFocus Value Conference keynote speaker Chuck Royce (Trades, Portfolio) also has a holding in Allegiant.

Investors Bancorp

The fund owns 878,457 shares of Investors Bancorp, giving the position 5.79% equity portfolio weight. Shares averaged $11.33 during the June quarter.

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The Short Hills, New Jersey-based savings bank obtains funds through deposits and the wholesale market to originate loans and invest in securities. GuruFocus ranks the bank’s financial strength 6.2 out of 10 primarily due to an equity-to-asset ratio of 0.11, a ratio that outperforms 60.47% of global competitors.

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Western Digital

The fund owns 187,249 shares of Western Digital, giving the position 5.26% equity portfolio weight. Shares averaged $45.43 during the quarter.

The fund manager said in his March letter that while Western Digital detracted 2.93% from the fiscal 2018 performance, the worst performer, the stock rallied 31% during first-quarter 2019. Ahitov said Western Digital, a San Jose-based producer of data storage solutions, had strong potential in an industry that “benefitted from mega-trends” like artificial intelligence and the Internet of Things. The manager still sees strong potential in Western Digital as the market begins to “look through the down cycle” while the fund starts valuing the company based on its higher normalized earnings potential.

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GuruFocus ranks Western Digital’s profitability 7 out of 10 primarily due to a two-star business predictability rank, a Piotroski F-score of 6 and a Joel Greenblatt (Trades, Portfolio) return on capital that outperforms 73.74% of global competitors.

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Disclosure: Long Allegiant Air.

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About the author:

James Li
I am an editorial 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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