Baltimore-based investment firm T. Rowe Price recently released its updated portfolio dated Sept. 30. Brian Rogers (Trades, Portfolio), chairman of T. Rowe Price Group, has led the $30.2 billion Equity Income Fund since its inception in 1985. The Equity fund had a 17% annual average return over the past five years.
Rogers recently announced that he will step down as manager in October 2015, though he will continue to serve as chairman and chief investment officer. John Linehan, head of T. Rowe’s U.S. equity, will take over portfolio management duties.
A value investor, Rogers studied economics and finance at Harvard and said he was influenced by Benjamin Graham and David Dodd in his early years.
The fund has struggled to keep up with its peers since 2012, due to the struggle to find bargains in a bull market rally. Current NAV for the Equity Income Fund is $32.05, while the daily year-to-date return is -0.97%. Morningstar rates the fund as three stars over the three-, five- and 10-year periods.
Here are the most recent changes to T. Rowe’s portfolio:
New buys
Procter & Gamble (PG, Financial)
T. Rowe Price purchased 500,000 shares of Procter & Gamble for $81.99 per share. It previously held 750,000 shares in the first quarter 2014 but sold out the following quarter.
P&G sells branded consumer packages in more than 180 countries. Its business units are organized in five segments: beauty, grooming, health care, fabric and home care, and baby and family care. Its 37 brands include Olay, Pantene, Gillette and Pampers. Of those brands, 23 bring in $1-10 billion in annual sales, while 14 bring in $500 million to $1 billion in sales.
The company’s current P/E ratio is 21, which is near its 10-year high of 25.49.
Gross profit has been stagnant since about 2007, as has gross margin, due to the fact that P&G is an already large company.
The dividend yield is 2.98% which is close to the three-year low. The five-year growth rate is 7.9% and the share buyback rate is 1.1%.
T. Rowe purchased 3,250,000 shares of MetLife at $54.53 per share. MetLife offers life insurance, annuities, and property and casualty insurance.
The company may be undervalued according to its Peter Lynch chart, as the earnings line recently rose above the price line.
Its dividend yield is 2.7%, and the five-year growth rate is 6.4%
GuruFocus rates the company’s financial strength as 6/10 and profitability and growth as 7/10.
T. Rowe purchased 2,600,000 shares of News Corp, a diversified media company, at $17.17 per share.
News Corp’s business includes news and information services, book publishing, sports programming, and pay-TV distribution. Its newspaper brands include well-known names such as the Wall Street Journal, the Herald Sun in Australia and The Times in the U.K.
Gross profit recorded at $3,435 million in FY 2013, which is a slight decline from the previous year. However, News Corp has no debt, which places it in a good financial position — a must, due to the unstable nature of the media industry.
Other gurus who own News Corp stock include IVA International Fund (Trades, Portfolio), Charles de Vaulx (Trades, Portfolio), and Donald Smith (Trades, Portfolio).
Add
ConAgra Foods (CAG, Financial)
T. Rowe added 750,000 shares of ConAgra Foods priced at $31.49 per share; it now owns a total of 1 million shares. The fund had previously held shares in the fourth quarter 2012 but sold out the next quarter.
ConAgra sells packaged foods such as frozen potato products, vegetable, spice and grain products. Its brands include Banquet, Chef Boyardee, Hunt’s, Healthy Choice and Marie Callender’s.
Gross profit has increased steadily since 2012, and gross margin was 21% for FY 2014.
ConAgra’s P/E ratio jumped from 18.08 in FY 2013 to 45.82 in FY 2014, the highest it’s been since 2005.
The dividend yield is 3%, and the five-year growth rate is 6%. The next dividend will be paid on Dec. 2 at $0.25 per share.
T. Rowe Price also added to its stakes in Qualcomm (QCOM, Financial), Talisman Energy (TLM, Financial), Deere & Co. (DE, Financial), FirstEnergy Corp (FE, Financial), Telefonica (TEF, Financial), and Loews Corp (L, Financial).
Sold out
Allstate Corp (ALL, Financial)
T. Rowe sold its 3,635,122 shares in Allstate for $60.07 per share. The fund had owned shares since the fourth quarter 2010 but had been gradually selling them since the third quarter 2012.
Allstate provides personal property and casualty insurance, life insurance, and retirement and investment products.
The company’s dividend yield is 1.8% which is near the 10-year low. The five-year growth rate is 5.6%, and the share buyback rate is 4.6%.
Last quarter, Ray Dalio (Trades, Portfolio) and Jim Simons (Trades, Portfolio) also sold out of Allstate, while Louis Moore Bacon (Trades, Portfolio) added it as a new holding.
Petroleo Brasileiro SA Petrobras (PBR, Financial)
T. Rowe sold out 11,500,000 shares of the Brazilian crude oil and natural gas company at $16.81 per share. The fund has held shares since the third quarter 2011 and had been adding shares each quarter before selling out.
One reason may be that revenue per share growth has been negative over the past five years at -3.4%.
All three of the company’s margins (gross, operating and net) have been in long-term decline.
In addition, long-term debt has been increasing at an alarming rate, recording at $106,308 million in FY 2013, compared to $88,570 million the year before.
T. Rowe Price also sold out of Norfolk Southern Corp (NSC, Financial), which controls a major freight railroad, and Eni SpA (MIL:ENI), an oil and gas exploration company.
