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FPA Capital Fund Establishes 4 New Positions in 4th Quarter

- By Sydnee Gatewood

The FPA Capital Fund (Trades, Portfolio) disclosed its fourth-quarter portfolio this week, listing four new positions.


Managed by Arik A. Ahitov, Dennis M. Bryan, Chris J. Moreno and Sean R. Pompa, the fund invests in small and medium-sized companies with the goal of long-term capital growth. The current portfolio of 20 stocks is largely composed of securities in the energy sector.

GuruFocus data shows the fund outperformed the S&P 500 in 2016 with a return of 22.86%.

The fund"s new positions are Rowan Companies Inc. (RDC), Spirit Airlines Inc. (SAVE), Tenneco Inc. (TEN) and Capitol Federal Financial Inc. (CFFN). It also added to its position in InterDigital Inc. (IDCC) during the quarter.

Rowan Companies

After exiting a position in Rowan Companies in the third quarter of 2017, the fund established a new stake of 1.05 million shares for an average price of $14.05 per share. The position was given 5.83% portfolio space and is one of the fund"s top 10 holdings for the quarter.

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The Houston-based offshore drilling contractor has a market cap of $2.17 billion; its shares were trading around $17.15 on Thursday with a price-book (P/B) ratio of 0.41 and a price-sales (P/S) ratio of 1.60.

According to the Peter Lynch chart below, the stock is undervalued as it is trading below its fair value.

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GuruFocus ranked Rowan"s financial strength 5 of 10 and its profitability and growth 7 of 10. The company does not currently pay a dividend.

Of the gurus invested in Rowan Companies, First Pacific Advisors (Trades, Portfolio) has the largest position with 1.12% of outstanding shares. Other guru shareholders are Richard Pzena (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Mario Gabelli (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio) and Chuck Royce (Trades, Portfolio).

Spirit Airlines

The fund invested in 267,968 shares of Spirit Airlines for an average price of $38.4 per share, giving it 4.24% portfolio space.

The Florida-based airline has a market cap of $3.26 billion; its shares were trading around $46.94 on Thursday with a price-earnings (P/E) ratio of 14.88, a P/B ratio of 2.09 and a P/S ratio of 1.23.

The Peter Lynch chart below shows the stock is trading about evenly with its fair value.

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GuruFocus ranked Spirit"s financial strength 6 of 10 and its profitability and growth 7 of 10. The company does not pay a dividend.

Holding 0.37% of outstanding shares, the fund is the company"s sole guru investor.

Tenneco

FPA Capital purchased 97,230 shares of Tenneco for an average price of $59.06, expanding the portfolio 2.01%.

The Illinois-based auto parts manufacturer has a market cap of $3.25 billion; its shares were trading around $63 on Thursday with a P/E ratio of 18.71, a P/B ratio of 5.12 and a P/S ratio of 0.38.

Based on the Peter Lynch chart below, the stock appears to be overpriced as it is trading above its fair value.

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GuruFocus ranked Tenneco"s financial strength 5 of 10 and its profitability and growth 6 of 10. The company"s trailing dividend yield and forward dividend yield are both 1.59%. The dividend payout ratio is 22%.

Of the gurus invested in Tenneco, Gabelli has the largest holding with 1.38% of outstanding shares. Diamond Hill Capital (Trades, Portfolio), Columbia Wanger (Trades, Portfolio), Barrow, Hanley, Mewhinney & Strauss, Steven Cohen (Trades, Portfolio) and several other gurus are also shareholders.

Capitol Federal Financial

In its smallest new purchase of the quarter, the fund bought 306,449 shares of Capitol Federal Financial for an average price of $14.02 per share, impacting the portfolio by 1.45%.

The Kansas-based bank has a market cap of $1.88 billion; its shares were trading around $13.61 on Thursday with a P/E ratio of 21.58, a P/B ratio of 1.36 and a P/S ratio of 8.39.

According to the Peter Lynch chart below, the stock is overpriced as it is trading above its fair value.

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GuruFocus ranked Capitol Federal"s financial strength 4 of 10 and its profitability and growth 6 of 10. The company"s trailing dividend yield is 2.51% and its forward dividend yield is 2.54%. The payout ratio is 54%.

With 5.74% of outstanding shares, Jim Simons (Trades, Portfolio) is the company"s largest guru shareholder. Ken Fisher (Trades, Portfolio) and Gabelli also own the stock.

InterDigital

The fund added 80,609 shares, or 44.92%, to its position in InterDigital, which is its fifth-largest holding, for an average price of $74.72 per share. The trade had an impact of 2.17% on the portfolio. Since the first quarter of 2012, GuruFocus estimates the fund has gained approximately 74% on its investment.

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The Delaware-based wireless communications company has a market cap of $2.77 billion; its shares were trading around $79.8 on Thursday with a P/E ratio of 10.90, a P/B ratio of 3.34 and a P/S ratio of 4.68.

The Peter Lynch chart below suggests the stock is undervalued as it is trading below its fair value.

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GuruFocus ranked InterDigital"s financial strength 7 of 10 and its profitability and growth 9 of 10. The company"s trailing dividend yield is 1.64% and its forward dividend yield is 1.77%. The payout ratio is 12%.

Simons is the company"s largest guru shareholder with 1.29% of outstanding shares. Other gurus invested in InterDigital are John Rogers (Trades, Portfolio), Greenblatt, John Hussman (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio) and Royce.

Other trades

During the quarter, the fund also reduced several of its largest positions, including Cimarex Energy Co. (XEC), Noble Energy Inc. (NBL), Western Digital Corp. (WDC), Avnet Inc. (AVT) and SM Energy Co. (SM), among others.

Disclosure: I do not own any stocks mentioned.

This article first appeared on GuruFocus.