First Eagle Investment (Trades, Portfolio), a New York-based firm that seeks long-term capital appreciation through a value-oriented approach, disclosed this week that it established five new holdings during the third quarter: Charles Schwab Corp. (SCHW, Financial), The Kraft Heinz Co. (KHC, Financial), HD Supply Holdings Inc. (HDS, Financial), Bloom Energy Corp. (BE, Financial) and Marriott Vacations Worldwide Corp. (VAC, Financial).
Matthew McLennan, our keynote speaker at the 2020 GuruFocus Value Conference, leads First Eagle’s Global Value team and manages the firm’s Global Value, International Value, U.S. Value and Gold strategies. Prior to joining First Eagle, McLennan worked as co-portfolio manager for Goldman Sachs Asset Management in London, a subsidiary of Goldman Sachs Group Inc. (GS, Financial).
First Eagle applies the conviction that the best way to preserve capital is through absolute long-term performance. According to the firm’s website, First Eagle values its legacy as “patient, thoughtful, long-term investors.”
Portfolio overview
As of quarter-end, First Eagle’s $35.21-billion equity portfolio contains 110 stocks with a turnover rate of 2%. The top three sectors in terms of portfolio weight are financial services, materials and energy, with weights of 18.07%, 16.1% and 13.42%, respectively.
Charles Schwab
First Eagle purchased 4,665,269 shares of Charles Schwab, giving the position a weight of 0.55% in the equity portfolio. Shares traded at an average of $40.33 during the quarter.
The San Francisco-based company operates in the brokerage, banking and asset-management businesses. Charles Schwab operates a wide network of brick-and-mortar brokerage branch offices and a well-established online investing office.
GuruFocus ranks Charles Schwab’s financial strength 4 out of 10. The company’s equity-to-asset ratio of 0.08 underperforms 91.96% of global competitors, offsetting a strong cash-to-debt ratio of 2.73. The website also warns that Charles Schwab’s long-term debt has increased $1.6 billion over the past three years, a significant increase.
Gurus with large holdings in Charles Schwab include Dodge & Cox and Al Gore (Trades, Portfolio)’s Generation Investment Management.
Kraft Heinz
First Eagle purchased 5,462,461 shares of Kraft Heinz, giving the position 0.43% weight in the equity portfolio. Shares averaged $28.76 during the quarter.
The Pittsburgh-based company produces consumer packaged goods through brands like Oscar Mayer, Planters and its popular Heinz Ketchup. GuruFocus ranks the company’s financial strength 4 out of 10 on several weak signs, which include a weak Piotroski F-score of 4, a low Altman Z-score of 0.33 and poor interest coverage of 3.7. Despite this, Kraft Heinz’s profitability ranks 6 out of 10 on the heels of operating margins outperforming 92.71% of global competitors, despite returns underperforming over 88% of global peers.
Warren Buffett (Trades, Portfolio)’s Berkshire Hathaway Inc. (BRK.A, Financial)(BRK.B, Financial) has not released its third-quarter portfolio yet (the deadline is 45 days after the quarter ends). Despite its troubles, Kraft Heinz has been one of Berkshire’s top 10 holdings over the past several quarters.
Tom Gayner (Trades, Portfolio) also purchased shares in Kraft Heinz.
HD Supply
First Eagle purchased 191,000 shares of HD Supply. Shares were trading at an average price of $39.22 during the quarter.
The Atlanta-based company operates two industrial distribution sectors: specialty construction and facilities/home improvement. According to GuruFocus, HD Supply’s margins and returns are outperforming over 83% of global competitors, suggesting good profitability potential.
Bloom Energy
First Eagle purchased 392,500 shares of Bloom Energy. During the quarter, shares of the company traded at an average price of $7.51.
The San Jose-based company markets and sells its energy servers primarily through the company’s direct sales organization in the U.S. For the quarter, Bloom Energy reported revenues of $43.3 million (up 22.8% from the prior-year quarter), driven primarily by the increase in product acceptances of approximately 96 systems (up 46.6% from the prior-year quarter).
Marriott Vacations Worldwide
First Eagle purchased 16,800 shares of Marriott Vacations Worldwide. Shares traded at an average price of $98.36 during the quarter.
The Orlando-based company owns and manages a cluster of resorts and accommodation facilities under brands like Marriott Vacation Club, Grand Residencies and The Ritz-Carlton Destinations Club. GuruFocus ranks the company’s profitability 7 out of 10. Operating margins are outperforming 69.76% of global competitors despite returns underperforming over 51% of global peers.
Disclosure: No positions.
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