Top 5 1st-Quarter Buys of Steven Scruggs' FPA Queens Road Small Cap Fund
- By James Li
Steven Scruggs (Trades, Portfolio), portfolio manager of the FPA Queens Road Small Cap Value Fund, disclosed this week that the fund's top five buys for the fiscal first quarter were InterDigital Inc. (NASDAQ:IDCC), Treehouse Foods Inc. (NYSE:THS), Concentrix Corp. (NASDAQ:CNXC), Graphic Packaging Holding Co. (NYSE:GPK) and Synaptics Inc. (NASDAQ:SYNA).
Charlotte-based Queens Road Funds announced on its website that First Pacific Advisors (Trades, Portfolio) became investment advisor to the fund effective Nov. 1, 2020, leapfrogging former advisor to the fund Bragg Financial Advisors. Per the joint agreement, FPA's Capital Fund was renamed the FPA Queens Road Small Cap Value Fund.
The Queens Road Small Cap Value Fund seeks long-term capital appreciation by investing in a diversified portfolio of small-cap companies through fundamental, bottom-up analysis. The fund's research process stems from Benjamin Graham's principles of finding companies that are trading at a discount to intrinsic value.
As of Feb. 28, the fund's $344 million equity portfolio contains 53 stocks, with nine new positions and a turnover ratio of 51%. The top four sectors in terms of weight are technology, industrials, financial services and consumer cyclical, representing 21.75%, 21.27%, 19.37% and 13.10% of the equity portfolio.
InterDigital
The fund purchased 215,295 shares of InterDigital (NASDAQ:IDCC), expanding the position 328.08% and the equity portfolio 3.96%. Shares averaged $64.31 during the first quarter; the stock is modestly overvalued based on Wednesday's price-to-GF Value ratio of 1.13.
The Wilmington, Delaware-based company provides wireless communications through cellular and "internet of things" technologies. GuruFocus ranks the company's profitability 8 out of 10 on several positive investing signs, which include a Joel Greenblatt (Trades, Portfolio) return on capital that outperforms 98% of global competitors and a net profit margin that outperforms 78% of global telecommunication companies, despite three-year revenue and earnings growth rates underperforming more than 80% of global peers.
Jim Simons (Trades, Portfolio)' Renaissance Technologies also has a holding in InterDigital.
Treehouse Foods
The fund purchased 200,980 shares of Treehouse Foods (NYSE:THS), giving the position 2.92% equity portfolio space. Shares averaged $43.48 during the first quarter; the stock is fairly valued based on Wednesday's price-to-GF Value ratio of 1.08.
GuruFocus ranks the Oak Brook, Illinois-based food manufacturer's profitability 5 out of 10 on the back of profit margins and returns underperforming over half of global competitors, partially offset by a solid Piotroski F-score of 5.
Jana Partners (Trades, Portfolio) also has a holding in Treehouse Foods.
Concentrix
The fund purchased 65,895 shares of Concentrix (NASDAQ:CNXC), allocating 2.36% of its equity portfolio to the stake. Shares averaged $108 during the first quarter.
GuruFocus ranks the Fremont, California-based customer engagement software company's financial strength 5 out of 10 on the back of a moderately weak Altman Z-score of 2.89 despite interest coverage and debt ratios underperforming more than 60% of global competitors.
Gurus with large holdings in Concentrix include Sarah Ketterer (Trades, Portfolio) and David Einhorn (Trades, Portfolio).
Graphic Packaging
The fund purchased 497,217 shares of Graphic Packaging (NYSE:GPK), dedicating 2.29% of its equity portfolio to the position. Shares averaged $16.61 during the first quarter; the stock is fairly valued based on Wednesday's price-to-GF Value ratio of 1.06.
GuruFocus ranks the Atlanta-based packaging company's profitability 8 out of 10 on the back of three-year revenue and earnings growth rates outperforming over 70% of global competitors despite net margins and returns underperforming more than half of global packaging companies.
Synapsis
The fund purchased 55,644 shares of Synapsis (NASDAQ:SYNA), boosting the position 72.96% and the equity portfolio 2.16%. Shares averaged $102.73 during the first quarter; the stock is significantly overvalued based on Wednesday's price-to-GF Value ratio of 3.70.
GuruFocus ranks the San Jose, California-based human interface provider's profitability 6 out of 10: Although the company's returns are outperforming over 70% of global competitors, operating margins and three-year revenue growth rates underperform more than 60% of global semiconductor companies.
Disclosure: No positions.
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This article first appeared on GuruFocus.
