David Carlson (Trades, Portfolio), manager of the Elfun Trusts, disclosed in his second-quarter portfolio, which was released earlier this week, that he entered two positions and exited two others.
With the goal of generating long-term capital growth and future income, the guru’s fund, which is part of Boston-based State Street Global Advisors, picks stocks based on the company’s potential to increase net income and dividends over time.
Based on these criteria, Carlson established holdings in ASML Holding NV (ASML, Financial) and Verizon Communications Inc. (VZ, Financial) during the quarter. He sold out of Medtronic PLC (MDT, Financial) and Intuit Inc. (INTU, Financial).
ASML Holding
The guru invested in 145,000 shares of ASML Holding, allocating 1.11% of the equity portfolio to the position. The stock traded for an average price of $198.78 per share during the quarter.
The Dutch semiconductor company has a $96.62 billion market cap; its shares were trading around $219.94 on Friday with a price-earnings ratio of 36.74, a price-book ratio of 7.26 and a price-sales ratio of 7.93.
The Peter Lynch chart shows the stock is trading above its fair value, suggesting it is overpriced.
Boosted by comfortable interest coverage, GuruFocus rated ASML’s financial strength 7 out of 10. Additionally, the robust Altman Z-Score of 7.52 indicates the company is in good fiscal health.
The company’s profitability and growth scored an 8 out of 10 rating, driven by an expanding operating margin, strong margins that outperform a majority of competitors and a moderate Piotroski F-Score of 4, which implies business conditions are stable. Despite recording consistent earnings and revenue growth, the business predictability rank of three out of five stars is on watch. According to GuruFocus, companies with this rank typically see their stocks gain an average of 8.2% per annum over a 10-year period.
Of the gurus invested in ASML, Frank Sands (Trades, Portfolio) has the largest stake with 0.75% of outstanding shares. Other top guru shareholders include Ken Fisher (Trades, Portfolio), PRIMECAP Management (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies and Ron Baron (Trades, Portfolio).
Verizon
Carlson picked up 200,000 shares of Verizon, dedicating 0.42% of the equity portfolio to the holding. During the quarter, the stock traded for an average price of $57.65 per share.
The New York-based telecommunications company has a market cap of $228.54 billion; its shares were trading around $55.26 on Friday with a price-earnings ratio of 14.43, a price-book ratio of 4.15 and a price-sales ratio of 1.76.
According to the Peter Lynch chart, the stock is trading near its fair value.
Verizon’s financial strength and profitability and growth were both rated 5 out of 10 by GuruFocus. Although the company has sufficient interest coverage, the Altman Z-Score of 1.58 warns it could be in danger of going bankrupt.
The company is supported by strong margins and returns that outperform more than 60% of industry peers. Verizon also has a moderate Piotroski F-Score of 5. The one-star business predictability rank, however, is on watch as a result of declining revenue per share. GuruFocus says companies with this rank typically see their stocks gain an average of 1.1% per year.
With 0.20% of outstanding shares, Barrow, Hanley, Mewhinney & Strauss is the company’s largest guru shareholder. The T Rowe Price Equity Income Fund (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), John Rogers (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Tweedy Browne (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Mairs and Power (Trades, Portfolio), Bernard Horn (Trades, Portfolio), Arnold Van Den Berg (Trades, Portfolio), Tom Gayner (Trades, Portfolio), John Hussman (Trades, Portfolio), Fisher, Murray Stahl (Trades, Portfolio) and several other gurus also own the stock.
Medtronic
The investor divested of his 240,000 remaining shares of Medtronic, impacting the equity portfolio by -0.83%. The shares traded for an average price of $91.22 during the quarter.
GuruFocus estimates Carlson has gained 17.5% on the investment since the third quarter of 2015.
The Irish medical devices manufacturer has a $137.29 billion market cap; its shares were trading around $102.37 on Friday with a price-earnings ratio of 29.93, a price-book ratio of 2.76 and a price-sales ratio of 4.55.
Based on the Peter Lynch chart, the stock appears to be overvalued.
Boosted by adequate interest coverage, GuruFocus rated Medtronic’s financial strength 6 out of 10. In addition, the Altman Z-Score of 3.26 indicates the company is in good fiscal standing.
The company’s profitability and growth fared even better, scoring a 9 out of 10 rating. Although the operating margin is in decline, it still outperforms a majority of competitors. In addition, Medtronic is supported by a high Piotroski F-Score of 8, which suggests operating conditions are healthy. The five-star business predictability rank is on watch as a result of a slowdown in revenue per share growth over the last 12 months. According to GuruFocus, companies with this rank typically see their stocks gain an average of 12.1% per year.
Barrow, Hanley, Mewhinney & Strauss is the company’s largest guru shareholder with 0.99% of outstanding shares. Other top guru shareholders include the Vanguard Health Care Fund (Trades, Portfolio), Pioneer, Primecap, Dodge & Cox, Hotchkis & Wiley, Diamond Hill Capital (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Greenblatt, Fisher and Jeff Auxier (Trades, Portfolio).
Intuit
Carlson sold his 50,000 remaining shares of Intuit, impacting the equity portfolio by -0.50%. The stock traded for an average per-share price of $254.23 during the quarter.
According to GuruFocus data, the guru made an estimated 69% on the investment since the third quarter of 2015.
The software company, which is headquartered in Mountain View, California, has a market cap of $72.06 billion; its shares were trading around $276.81 on Friday with a price-earnings ratio of 44.47, a price-book ratio of 18.03 and a price-sales ratio of 11.13.
The Peter Lynch chart suggests the stock is overvalued.
Intuit’s financial strength and profitability and growth were both rated 8 out of 10 by GuruFocus. In addition to comfortable interest coverage, the company’s strong Altman Z-Score of 19.31 indicates it is fiscally stable.
Although the operating margin is in decline, it still outperforms a majority of industry peers. The company is also supported by strong returns, consistent earnings and revenue growth and a moderate Piotroski F-Score of 5. Intuit’s four-star business predictability rank, however, is on watch. GuruFocus says companies with this rank typically see their stocks gain an average of 9.8% per year.
Of the gurus invested in Intuit, PRIMECAP has the largest stake with 1.5% of outstanding shares. Sands, Philippe Laffont (Trades, Portfolio), Pioneer, George Soros (Trades, Portfolio), Grantham, Ray Dalio (Trades, Portfolio), Cohen, Lee Ainslie (Trades, Portfolio), Fisher, Stahl, Caxton Associates (Trades, Portfolio) and Paul Tudor Jones (Trades, Portfolio) are also shareholders.
Additional trades
During the quarter, Carlson made several other changes to his portfolio. He boosted a number of holdings, including UnitedHealth Group Inc. (UNH, Financial), Boston Scientific Corp. (BSX, Financial) and Merck & Co. Inc. (MRK, Financial). He also trimmed his positions in PepsiCo Inc. (PEP, Financial), Apple Inc. (AAPL, Financial) and American Tower Corp. (AMT, Financial), among others.
The guru’s $2.73 billion equity portfolio, which is composed of 44 stocks, is heavily invested in the technology, financial services and health care sectors.
According to its website, the fund posted a -3.39% return in 2018, outperforming the S&P 500’s return of -4.38%.
Disclosure: No positions.
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