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Steven Romick's Top 5 Holdings as of 3rd Quarter

- By James Li

According to GuruFocus top 10 holdings data, FPA Crescent Fund manager Steven Romick (Trades, Portfolio)'s top five holdings as of the third quarter are Naspers Ltd. (NPN), American International Group Inc. (AIG), Arconic Inc. (ARNC), United Technologies Corp. (UTX) and CIT Group Inc. (CIT).


Managing a portfolio of 58 stocks, Romick seeks value in all aspects of a company's business structure, including stocks and bonds. The manager invests in out-of-favor companies trading at low price-earnings ratios: as a long-term investor, Romick looks at a long-term valuation parameter close to Robert Shiller's cyclically-adjusted price-earnings ratio. As of Friday, the U.S. market Shiller price-earnings ratio is 29.2, approximately 72.8% higher than the historical mean of 16.9. Based on this market valuation level, the expected market return over the next eight years is -1.5%.

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Romick said in his shareholder letter the FPA Crescent Fund returned 4.15% for the quarter, approximately in line with the returns of the Standard & Poor's 500 value index and the MSCI ACWI Value index. The former returned 5.86% while the latter returned 3.98%. Despite this, growth indexes still outperformed value indexes, with the S&P 500 growth index returning 9.28% and the MSCI ACWI Growth index returning 4.56%

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The $10.93 billion equity portfolio's top two sectors are financial services, which represents 34.81% of the portfolio, and technology, which represents 30.93%.

Naspers

Naspers, a South African online media company, represents 5.11% of the equity portfolio.

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Naspers operates several e-commerce platforms, including online retail, payments and services, video entertainment and print. GuruFocus ranks the company's profitability 6 out of 10: even though revenues and profit margins have declined over the past three to five years, Naspers' return on assets is near a 10-year high of 39.99% and outperforms 86% of global competitors.

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Other gurus with holdings in Naspers include David Herro (Trades, Portfolio) and Bestinfond (Trades, Portfolio).

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American International Group

American International Group, a major diversified insurance company, represents 4.75% of the equity portfolio.

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GuruFocus ranks the New York-based company's financial strength 4 out of 10 on several weak indicators, including a cash-to-debt ratio of 0.08 and a debt-to-equity ratio of 0.59, both underperforming over 80% of global competitors. Despite low financial strength, AIG has a dividend yield near a five-year high and a price-book ratio near a five-year low.

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Arconic

Arconic, a Pittsburgh-based diversified industrial company, represents 3.91% of the equity portfolio.

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The former Alcoa Corp. (AA) spinoff manufactures value-added aluminum and specialty metals products for a wide variety of industrial end markets, including aerospace and defense, building and construction and automobiles. GuruFocus ranks the company's profitability 4 out of 10: although its operating margins are outperforming 62% of global competitors, Arconic's net margin and return on assets underperform over 85% of global diversified industrial companies.

United Technologies

United Technologies, a combined holding of activist investors Bill Ackman (Trades, Portfolio) and Daniel Loeb (Trades, Portfolio), represents 3.87% of Romick's equity portfolio.

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GuruFocus ranks the Farmington, Connecticut-based company's profitability 7 out of 10 on several positive indicators, which include a four-star business predictability rank and a Joel Greenblatt (Trades, Portfolio) return on capital that outperforms 94% of global aerospace and defense companies.

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CIT Group

CIT Group, a New York-based regional bank, represents 3.67% of the equity portfolio.

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CIT Group provides financing, leasing and advisory services to middle-market companies in a diverse group of industries. Although the regional bank's financial strength and profitability both rank a modest 4 out of 10, GuruFocus lists four positive investing signs for CIT Group: a dividend yield near a two-year high, a price-earnings ratio near a two-year low, a price-book ratio near a two-year low and a price-sales ratio near a five-year low.

Disclosure: No positions.

Read more here:

  • Bill Ackman's Top 5 Holdings as of 3rd Quarter
  • Steven Romick Buys 2 Stocks in 3rd Quarter
  • Economic Profits in Value Investing


This article first appeared on GuruFocus.