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David Rolfe's Top 5 Position Boosts During 4th Quarter

- By James Li

David Rolfe (Trades, Portfolio), manager of Wedgewood Partners, disclosed last week his top five position boosts during fourth-quarter 2018 were in Facebook Inc. (FB), Ulta Beauty Inc. (ULTA), Charles Schwab Corp. (SCHW), Fastenal Co. (FAST) and Booking Holdings Inc. (BKNG).


Managing a portfolio of 35 stocks, Rolfe seeks companies that meet the following criteria: dominant product or service, sustainable revenue and earnings growth, high profitability and strong, shareholder-oriented management. According to current portfolio statistics, Rolfe's top sectors in terms of portfolio weight are technology, financial services and consumer discretionary.

Guru reports poor performance during the quarter, led by Apple

Rolfe said in his shareholder letter his fund returned -15.17% during the quarter, slightly outperforming the benchmark Russell 1000 Growth index return of -15.89% but underperforming the Standard & Poor's 500 index return of -13.52%. Top detractors include Facebook, Qualcomm Inc. (QCOM) and Berkshire Hathaway Inc. (BRK-A)(BRK-B) CEO Warren Buffett (Trades, Portfolio)'s top holding Apple Inc. (AAPL).

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The fund manager said that although the Cupertino, California-based tech giant reported double-digit sales growth, shares tumbled on management's weak holiday-quarter guidance. Rolfe then mentioned that management further lowered Apple's revenue guidance due to a "sudden slowdown" in iPhone, iPad and Mac sales in China.

Facebook

Rolfe added 74,506 shares of Facebook for an average price of $144.02, increasing his equity portfolio 0.65%.

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The fund manager said that Facebook, another key detractor in the portfolio, had a "horrible" 2018, a year marred with government regulatory threats as well as security and privacy breaches. Despite this, Facebook still has "superior profitability metrics" primarily due to its unique and defensible value proposition. GuruFocus ranks the Menlo Park, California-based social media giant's profitability 9 out of 10 on several strong indicators, which include expanding profit margins and a solid Piotroski F-score of 7. Further, Facebook's financial strength ranks 9 out of 10 on robust interest coverage and an Altman Z-score of 23.64.

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With 41 guru owners, Facebook remains one of the most broadly held stocks according to aggregated portfolio statistics. Gurus that are riding the company's strong profitability include Chris Davis (Trades, Portfolio), Steven Romick (Trades, Portfolio) and First Eagle Investment (Trades, Portfolio).

Ulta Beauty

Rolfe added 40,015 shares of Ulta Beauty for an average price of $276.22, expanding the equity portfolio 0.65%.

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Bolingbrook, Illinois-based Ulta Beauty offers a wide variety of beauty products, including cosmetics, fragrance, skin and hair care products. GuruFocus ranks the company's profitability 9 out of 10 on several positive investing signs, which include expanding profit margins and a strong Piotroski F-score of 7. Additionally, Ulta Beauty's business predictability ranks five stars out of five on strong and consistent revenue and earnings growth over the past 10 years.

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Other gurus riding Ulta Beauty's strong profitability include Philippe Laffont (Trades, Portfolio), Steven Cohen (Trades, Portfolio), Lee Ainslie (Trades, Portfolio) and Ray Dalio (Trades, Portfolio)'s Bridgewater Associates.

Charles Schwab

Rolfe added 167,009 shares of Charles Schwab for an average price of $45.02, increasing his equity portfolio 0.46%.

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The fund manager said Charles Schwab, one of the top five detractors for the year, underperformed as declines in global equity markets weighed on investors. Despite this, Rolfe still believes the company has potential into increase net interest margins through its "prudent expense management and excess capital."

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Fastenal

Rolfe added 119,185 shares of Fastenal for an average price of $54.06, increasing his equity portfolio 0.41%.

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Fastenal distributes various industrial supplies to construction companies. GuruFocus ranks the company's profitability 8 out of 10: Even though profit margins have declined over the past five years, Fastenal's operating margin is still outperforming 96% of global competitors. Additionally, the company's business predictability ranks four stars out of five on strong and consistent revenue growth over the past 10 years.

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Booking Holdings

Rolfe added 1,552 shares of Booking Holdings for an average price of $1,827.19, increasing his equity portfolio 0.18%.

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Booking Holdings offers a wide variety of reservation services through brands like Priceline.com, Booking.com, OpenTable and Rentalcars.com. GuruFocus ranks the company's profitability 9 out of 10 on several positive indicators, which include expanding profit margins and returns on assets that are outperforming 87% of global competitors. Additionally, the company's business predictability ranks 3.5 stars out of five on strong and consistent revenue growth over the past 10 years.

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Disclosure: Author owns shares of ULTA.

Read more here:

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John Paulson's Top 5 Buys in 4th Quarter

This article first appeared on GuruFocus.