David Rolfe (Trades, Portfolio), the chief investment officer of Wedgewood Partners, disclosed his equity portfolio for the first quarter earlier this week.
The guru's St. Louis-based firm approaches potential investments with the mindset of a business owner, striving to generate significant long-term wealth by analyzing a handful of undervalued companies that have a dominant product or service, consistent earnings, revenue and dividend growth, are highly profitable and have strong management teams.
In his shareholder letter for the three-month period ended March 31, Rolfe commented on the recent banking crisis, noting the “folly of the Fed’s obsession with bringing inflation back to their nirvana of 2% has slammed the U.S. banking industry into the windshield.”
He continued:
“Specifically, the matter of insured versus uninsured deposits must be addressed in order to mark the end of the crisis. No easy task for sure. Changing FDIC insured deposit levels takes an act of Congress. No best friends across that aisle. One glance at the calendar does not give any banker (or bank shareholder) hope for a quick resolution. The Congressional Budget Office (CBO) projects that, if the debt limit remains unchanged, the federal government's ability to borrow using even extraordinary measures will be exhausted between July and September of this year. Relatedly, the “x date” after which the U.S. Treasury may not be able to pay the federal government’s bills is August 18. It looks like it will be an unusually hot summer in D.C. Not to mention, the 2024 election season will be in full swing by this fall too.”
Keeping these considerations in mind, Rolfe’s 13F filings show he did not enter any new positions, but sold out of four stocks and added to or trimmed a number of other existing investments during the quarter. The most significant trades included a reduction of the Progressive Corp. (PGR, Financial) holding and boosts to the UnitedHealth Group Inc. (UNH, Financial), Meta Platforms Inc. (META, Financial), Pool Corp. (POOL, Financial) and Alphabet Inc. (GOOGL, Financial) positions.
Investors should be aware 13F filings do not give a complete picture of a firm’s holdings as the reports only include its positions in U.S. stocks and American depository receipts, but they can still provide valuable information. Further, the reports only reflect trades and holdings as of the most-recent portfolio filing date, which may or may not be held by the reporting firm today or even when this article was published.
Progressive
The investor slashed the Progressive (PGR, Financial) holding by 97.52%, selling 137,710 shares. The transaction impacted the equity portfolio by -3.28%. The stock traded for an average price of $137.89 per share during the quarter.
Rolfe now holds a total of 3,500 shares, which represent 0.08% of the equity portfolio. GuruFocus found he has gained an estimated 37.83% on the investment so far.
The Mayfield, Ohio-based insurance company has a $79.25 billion market cap; its shares were trading around $135.67 on Thursday with a price-earnings ratio of 96.90, a price-book ratio of 4.85 and a price-sales ratio of 1.54.
The GF Value Line suggests the stock is fairly valued currently based on its historical ratios, past financial performance and analysts’ future earnings projections.
At 76 out of 100, the GF Score indicates the company is likely to have average performance going forward. While it received a high rating for profitability, the growth, momentum and financial strength ranks were more moderate and value was low.
Of the gurus invested in Progressive, PRIMECAP Management (Trades, Portfolio) has the largest stake with 0.26% of its outstanding shares. Andreas Halvrosen, the Parnassus Value Equity Fund (Trades, Portfolio), Tom Gayner (Trades, Portfolio), Jim Simons (Trades, Portfolio)’ Renaissance Technologies and several other gurus also own the stock.
UnitedHealth
The guru increased the UnitedHealth Group (UNH, Financial) position by 24.09%, investing in 14,606 shares. The transaction had an impact of 1.17% on the equity portfolio. Shares traded for an average price of $482.57 each during the quarter.
Rolfe now holds 75,228 shares in total, accounting for the seventh-largest holding at 6.03% of the equity portfolio. GuruFocus estimates he has gained 9.33% on the investment to date.
The company headquartered in Minnetonka, Minnesota,, which offers managed health care and insurance services, has a market cap of $437.30 billion; its shares were trading around $476.95 on Thursday with a price-earnings ratio of 21.81, a price-book ratio of 5.46 and a price-sales ratio of 1.35.
According to the GF Value Line, the stock is fairly valued currently.
The company has high outperformance potential with a GF Score of 96, driven by solid ratings for three of the categories and more moderate value and financial strength ranks.
With a 0.63% stake, the Vanguard Health Care Fund (Trades, Portfolio) is the company’s largest guru shareholder. Other top guru investors include Dodge & Cox, Halvorsen, Simons’ firm, Jeremy Grantham (Trades, Portfolio) and Ruane Cunniff (Trades, Portfolio).
Meta Platforms
Rolfe boosted the Meta Platforms (META, Financial) investment by 16.33%, picking up 26,148 shares and impacting the equity portfolio by 0.94%. During the quarter, the stock traded for an average per-share price of $170.30.
The guru now holds 186,239 shares in total, occupying 6.69% of the equity portfolio. He has lost an estimated 0.55% on the long-held investment according to GuruFocus data. It is now his fifth-largest holding. GuruFocus says he has gained around 7.68% on the investment over its lifetime.
The social media company formerly known as Facebook, which is based in Menlo Park, California, has a $631.78 billion market cap; its shares were trading around $245.54 on Thursday with a price-earnings ratio of 30.46, a price-book ratio of 5.08 and a price-sales ratio of 5.57.
Based on the GF Value Line, the stock appears to be significantly undervalued currently.
Further, the GF Score of 96 indicates the company has high outperformance potential on the back of high ranks for profitability, growth, financial strength and value as well as a middling momentum rating.
Philippe Laffont (Trades, Portfolio) is Meta’s largest guru shareholder with a 0.31% stake. The stock is also being held by Chase Coleman (Trades, Portfolio), Dodge & Cox, Chris Davis (Trades, Portfolio), First Eagle Investment (Trades, Portfolio), Ken Fisher (Trades, Portfolio), Halvorsen, Baillie Gifford (Trades, Portfolio), Grantham and many others.
Pool
The Pool (POOL, Financial) holding was expanded 49.53%, with Rolfe buying 14,783 shares. The transaction impacted the equity portfolio by 0.86%. The stock traded for an average price of $354.88 per share during the quarter.
The investor now holds a total of 44,631 shares, which make up 2.59% of the equity portfolio. According to GuruFocus, he has lost around 9.17% on the investment thus far.
Headquartered in Covington, Louisiana, the wholesale distributor of swimming pool supplies, parts and outdoor living products has a market cap of $13.94 billion; its shares were trading around $350.64 on Thursday with a price-earnings ratio of 20.84, a price-book ratio of 10.89 and a price-sales ratio of 2.33.
The GF Value Line suggests the stock is significantly undervalued currently.
The company has high outperformance potential based on its GF Score of 96. Although it raked in strong ratings for profitability, growth and value, the financial strength and momentum ranks were more moderate.
Holding 1.69% of outstanding shares, Baillie Gifford (Trades, Portfolio) is Pool’s largest guru shareholder. Additional investors include Simons’ firm, Fisher, Ron Baron (Trades, Portfolio), Jerome Dodson (Trades, Portfolio) and Chuck Royce (Trades, Portfolio).
Alphabet
Impacting the equity portfolio by 0.66%, Rolfe bolstered the position in Alphabet’s (GOOGL, Financial) Class A stock by 11.89%, or 37,745 shares. Shares traded for an average price of $95.94 each during the quarter.
He now holds 355,124 shares, which reflect 6.25% of the equity portfolio and is its sixth-largest holding. GuruFocus research shows Rolfe has gained an estimated 88.38% on the long-held investment.
The Mountain View, California-based communications services company, which owns the Google search engine, YouTube and a number of other businesses, has a $1.59 trillion market cap; its Class A shares were trading around $122.57 on Thursday with a price-earnings ratio of 27.30, a price-book ratio of 5.98 and a price-sales ratio of 5.72.
According to the GF Value Line, the stock is modestly undervalued currently.
The GF Score of 99 means the company has high outperformance potential, receiving high ratings for all five criteria.
The largest guru shareholder of Alphabet’s Class A stock is Fisher with a 0.33% stake. Other top guru investors include Primecap, Dodge & Cox, Coleman, the Harbor Capital Appreciation Fund (Trades, Portfolio), Bill Nygren (Trades, Portfolio) and Laffont.
Additional trades and portfolio performance
During the quarter, Rolfe also cut back his investments in Microsoft Corp. (MSFT, Financial), Texas Pacific Land Corp. (TPL, Financial) and Tractor Supply Co. (TSCO, Financial) as well as boosted the positions in Taiwan Semiconductor Manufacturing Co. Ltd. (TSM, Financial) and PayPal Holdings Inc. (PYPL, Financial).
Wedgewood's $590 million equity portfolio, which is composed of 37 stocks, is most heavily invested in the technology, financial services and consumer cyclical sectors.
The firm posted a return of -25.4% for 2022, underperforming the S&P 500 Index's -18.11% return.
