Dodge & Cox's Top New Buys of Q3

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Dec 04, 2014
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The Dodge & Cox fund in companies that it believes the stock market is undervaluing but have strong potential long-term growth. It returned 8% for the first nine months of the year, just shy of the 8.3% return of the S&P 500.

Managers at Dodge & Cox are optimistic about the direction of stocks going forward, saying in this third quarter letter:

“Our long-term outlook for equities remains positive and U.S. equity market valuations are reasonable: the S&P 500 traded at 15.1 times forward estimated earnings with a 2.0% dividend yield at quarter end. We are optimistic about the long-term prospects for corporate sales growth, earnings growth and cash returned to shareholders. Corporate balance sheets and cash flows continue to be robust. In our opinion, the Fund’s portfolio is well positioned to benefit from long-term global growth opportunities. Acknowledging that markets can be volatile over the short term, we encourage shareholders to remain focused on the long term.”

In the third quarter, managers purchased 41 new stocks. The portfolio lists 204 stocks in total, with the largest sector represented being Technology at 23.1% followed by Financial Services at 21.3%.

These are the largest new positions initiated in the third quarter: New Oriental Education & Technology Group Inc. (EDU, Financial), Actavis PLC (ACT, Financial), Qualcomm Inc. (QCOM, Financial) and Cisco Systems Inc. (CSCO, Financial).

New Oriental Education & Technology Group Inc. (EDU, Financial)

Dodge & Cox purchased 4,002,900 New Oriental Education shares, amounting to 0.089% of the portfolio.

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New Oriental Education & Technology Group Inc. commenced operations in China in 1993. New Oriental Education & Technology Group Inc. has a market cap of $3.49 billion; its shares were traded at around $21.41 with a P/E ratio of 16.80 and P/S ratio of 3.0. New Oriental Education & Technology Group Inc. had an annual average earnings growth of 29.50% over the past 10 years. GuruFocus rated New Oriental Education & Technology Group Inc. the business predictability rank of 4.5-star.

Actavis PLC (ACT, Financial)

Managers purchased 4,025 shares of Actavis PLC, a 0.0009% portfolio holding. The stock price averaged $224 per share in the third quarter.

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Actavis PLC was incorporated in Ireland on May 16, 2013. Actavis PLC has a market cap of $71.73 billion; its shares were traded at around $265.84 with a P/S ratio of 4.40. Actavis PLC had an annual average earnings growth of 1.90% over the past five years.

Qualcomm Inc. (QCOM, Financial)

Dodge & Cox bought 11,456 Qualcomm Inc. shares in the third quarter, representing 0.0008% of the portfolio.

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Qualcomm Inc. was incorporated in 1985 under the laws of the state of California. Qualcomm Inc. has a market cap of $121.2 billion; its shares were traded at around $74.37 with a P/E ratio of 15.80 and P/S ratio of 4.80. The dividend yield of Qualcomm Inc. stocks is 2.20%. Qualcomm Inc. had an annual average earnings growth of 13.70% over the past 10 years. GuruFocus rated Qualcomm Inc. the business predictability rank of 3.5-star.

Cisco Systems Inc. (CSCO, Financial)

Managers purchased 32,653 Cisco shares, also representing 0.0008% of the portfolio.

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Cisco Systems Inc. was incorporated in California on December 10, 1984. Cisco Systems Inc. has a market cap of $141.34 billion; its shares were traded at around $27.95 with a P/E ratio of 18.90 and P/S ratio of 3.10. The dividend yield of Cisco Systems Inc. stocks is 2.70%. Cisco Systems Inc. had an annual average earnings growth of 7.80% over the past 10 years. GuruFocus rated Cisco Systems Inc. the business predictability rank of 4-star.

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