The Parnassus Fund disclosed this week it established seven new positions during the second quarter: Microsoft Corp. (MSFT, Financial), CME Group Inc. (CME, Financial), Nike Inc. (NKE, Financial), AvalonBay Communities Inc. (AVB, Financial), Progressive Corp. (PGR, Financial), Monolithic Power Systems Inc. (MPWR, Financial) and The Howard Hughes Corp. (HHC, Financial).
Parnassus Investments founder and Chairman Jerome Dodson (Trades, Portfolio) said in a May 1, 2018 press release that while he will continue sharing insights to the fund, he gave the fund’s lead portfolio manager role to his partners Ian Sexsmith and Robert Klaber. The fund seeks long-term capital appreciation through securities with the following four attributes: wide moat, relevancy over the long term, quality management teams and a market price below the company’s intrinsic value.
As of quarter-end, the fund’s $942 million equity portfolio contains 34 stocks, of which seven are new positions. The equity portfolio contains 33.09% weight in technology, 18.48% weight in financial services and 13.51% weight in health care, the fund’s top three sectors in terms of portfolio weight. Additionally, the fund excludes industries where companies engage in the extraction, exploration, production and manufacturing of fossil fuels.
Microsoft
The fund purchased 262,828 shares of Microsoft, giving the position 3.74% weight in the equity portfolio. Shares averaged $126.89 during the quarter.
The Redmond, Washington-based company provides a wide variety of products and services, including Office, Azure and Windows. GuruFocus ranks the company’s profitability 9 out of 10 on several positive indicators, which include a strong Piotroski F-score of 8 and operating margins that outperform 92.05% of global competitors despite contracting approximately 1.6% per year on average over the past five years. Additionally, Microsoft’s business predictability ranks 4.5 stars out of five on strong and consistent revenue growth over the past 10 years.
Microsoft, the software company founded by Bill Gates (Trades, Portfolio), remains a broad holding among gurus according to the Aggregated Portfolio, a Premium feature of GuruFocus. Gurus with large holdings in Microsoft include PRIMECAP Management (Trades, Portfolio), Dodge & Cox and Pioneer Investments (Trades, Portfolio).
CME
The fund purchased 129,566 shares of CME, giving the holding 2.67% equity portfolio weight. Shares averaged $184.28 during the quarter.
The Chicago-based company operates exchanges that allow investors, suppliers and businesses to trade futures and derivates based on interest rates, equity indexes, foreign currencies, energy, metals and commodities. GuruFocus ranks CME’s profitability 7 out of 10: Even though the company’s three-year revenue growth rate of 9% underperforms 64% of global competitors, its operating margin has increased approximately 2.20% per year on average over the past five years and is outperforming 81% of global brokers and exchanges.
Nike
The fund purchased 229,943 shares of Nike, giving the position 2.05% weight in the equity portfolio. Shares averaged $84.21 during the quarter.
The Beaverton, Oregon-based apparel giant designs and markets a wide variety of sportswear and athletic footwear to over 50,000 retail accounts through a network of more than 1,142 company-owned stores. GuruFocus ranks Nike’s profitability 8 out of 10 on several positive indicators, which include a strong Piotroski F-score of 7 and a return on assets that outperforms 90.97% of global competitors. Additionally, Nike’s business predictability ranks five stars on strong and consistent revenue and earnings growth over the past 10 years.
AvalonBay
The fund purchased 90,430 shares of AvalonBay, giving the holding 1.95% equity portfolio space. Shares averaged $202.56 during the quarter.
The Arlington, Virginia-based real estate investment trust owns approximately 285 apartment communities, with nearly 84,000 units throughout 10 states and Washington, D.C. GuruFocus ranks the REIT’s profitability 9 out of 10 on several positive signs, which include a strong Piotroski F-score of 8 and operating margins that have increased approximately 6.20% per year on average over the past five years.
Progressive
The fund purchased 221,421 shares of Progressive, giving the position 1.88% equity portfolio weight. Shares averaged $77.36 during the quarter.
The Mayfield Village, Ohio-based company underwrites private and commercial auto insurance. GuruFocus lists a few positive investing signs for Progressive, including a 2.5-star business predictability rank and a return on equity that outperforms 96.87% of global competitors.
Monolithic Power Systems
The fund purchased 112,827 shares of Monolithic Power Systems, giving the position 1.63% equity portfolio weight. Shares averaged $136.03 during the quarter.
The Kirkland, Washington-based company provides high-performance power solutions to original equipment manufacturers, original design manufacturers and third-party distributors. GuruFocus ranks the company’s financial strength and profitability at least 8 out of 10 on several positive signs, which include no long-term debt, a solid Altman Z-score of 23.07 and operating margins that have increased approximately 16.10% per year on average over the past five years.
Howard Hughes
The fund purchased 95,918 shares of Howard Hughes, giving the position 1.26% equity portfolio weight. Shares averaged $107.50 during the quarter.
The Dallas-based company develops master planned communities and other strategic real estate development opportunities in the U.S. GuruFocus ranks the company’s financial strength 4 out of 10 on several weak signs, which include a debt-to-equity ratio that underperforms 60.95% of global competitors and an Altman Z-score that suggests possible financial distress. Despite this, the company’s profitability ranks 7 out of 10 on the heels of profit margins nearing a 10-year high and a Joel Greenblatt (Trades, Portfolio) return on capital outperforming 90.88% of global competitors.
Pershing Square manager Bill Ackman (Trades, Portfolio) also has a stake in Howard Hughes.
Disclosure: No positions.
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