PRIMECAP Management (Trades, Portfolio), founded by Chairman and Chief Investment Officer Howard B. Schow, recently added new positions to its portfolio of 260 stocks, valued at ~$98.7 billion with a quarter over quarter turnover rate of 3% during the fourth quarter of 2014.
30.7% of the firm's portfolio consists of stocks in the heathcare sector and 16.4% are in the technology sector.
Here's a look at the most recent top buys:
Broadcam Corp (BRCM, Financial)
PRIMECAP added 2,585,100 shares of BRCM at an average price of $40.92/share.
Broadcam was incorporated in 1991 in California as a provider for semiconductors for both wired and wireless communications.
The Peter Lynch earnings line is currently at $47.80, indicating the stock may be undervalued, as it is currently trading at a price of $45.46/share.
Broadcom stock's current P/S ratio is 3.23, which is close to the three-year high of 3.20.
Over the the past 12 months, however, the company's revenue growth has slowed down. The average revenue per share growth rate for the year is -1.70%. The company's revenue is ~$8.43 billion.
Broadcom's current operating margin is 18.62% and the company's average growth rate for operating margin has been 18.40 over the past three years, which indicates the margin may be expanding.
Merck & Co Inc (MRK, Financial)
The firm purchased 700,000 shares of MRK at an average price of $58.42/share.
Merck & Co was incorporated in New Jersey in 1970 as a healthcare company that delivers vaccines, prescription medications, biologic therapies, animal health and consumer care products.
According to the Lynch earnings line at $72.10, this stock may be undervalued, as it is currently trading at $58.88/share.
The company's current P/S ratio is 4.03, which is close to its five-year high of 4.31 and above the Drug Manufacturers Industry median of 1.6, as indicated in the chart below.
Constellium NV (CSTM, Financial)
PRIMECAP added 2,037,900 shares of CSTM at the end of 2014 at an average price of $18.63/share.
Constellium manufactures aluminum products and solutions for aerospace, automotive and packaging markets. There are currently 23 operating production facilities.
The Lynch earnings line is currently at $39.10, which indicates the stock may be undervalued, as it is currently trading at $19.02/share.
Revenue per share as of September 2014 was $45.34, so the company's current P/S ratio is 0.42. Revenue for the year, ending last September was recorded as $4.772 billion and the revenue per share growth rate is -7% per year. Revenue has been in a steady decline over the past 12 months.
CSTM's current ratio is at a comfortable 1.55, which shows good short-term financial strength. The Metals & Mining industry median is 2.4.
PRIMECAP also increased stakes in the following positions: Airbus Group NV (AIR.France), LM Ericsson Telephone Company (ERIC, Financial), Keysight Technologies Inc (KEYS, Financial), Progressive Corp (PGR, Financial), Agilent Technologies Inc (A), Carnival Corp (CCL, Financial) and eBay Inc (EBAY, Financial).
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