<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="David Carlson (Trades, Portfolio)’s Elfun Trusts recently reported its portfolio update for the fourth quarter of 2019. During the quarter, the mutual fund established new positions in Honeywell International Inc. (NYSE:HON) and Sempra Energy (NYSE:SRE) and sold out of its holding in Charles Schwab Corp. (NYSE:SCHW). Major additions to existing positions included Fidelity National Information Services Inc. (NYSE:FIS), Facebook Inc. (NASDAQ:FB) and Amazon.com Inc. (NASDAQ:AMZN), while major reductions included Allergan PLC (NYSE:AGN), Charter Communications Inc. (NASDAQ:CHTR) and United Rentals Inc. (NYSE:URI).” data-reactid=”11″>David Carlson (Trades, Portfolio)’s Elfun Trusts recently reported its portfolio update for the fourth quarter of 2019. During the quarter, the mutual fund established new positions in Honeywell International Inc. (NYSE:HON) and Sempra Energy (NYSE:SRE) and sold out of its holding in Charles Schwab Corp. (NYSE:SCHW). Major additions to existing positions included Fidelity National Information Services Inc. (NYSE:FIS), Facebook Inc. (NASDAQ:FB) and Amazon.com Inc. (NASDAQ:AMZN), while major reductions included Allergan PLC (NYSE:AGN), Charter Communications Inc. (NASDAQ:CHTR) and United Rentals Inc. (NYSE:URI).
Elfun Trusts is a large-cap growth fund under State Street Global Advisors. As chief investment officer, Carlson is in charge of the investment direction for U.S. equities, including Elfun Trusts. The fund’s strategy revolves around choosing the highest-quality companies from among industry competitors, attaching some importance to the current or future payment of dividends. As of the end of the fourth quarter, the fund’s equity portfolio was valued at $2.89 billion.
The Fund’s top holdings are Microsoft Corp. (MSFT) at 6.30%., JPMorgan Chase & Co. (JPM) at 5.64% and Visa Inc. (V) at 5.46%. It is invested in a wide variety of industries, most notably financial services, health care and communication services.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Honeywell International” data-reactid=”45″>Honeywell International
During the quarter, Elfun Trusts established a new position of 346,900 shares in Honeywell, impacting the equity portfolio by 2.12%. Shares were trading at an average price of $173.73 over the period.
Honeywell International is an industrial conglomerate based in Charlotte, North Carolina. It is mainly known for manufacturing parts for the aerospace, control technologies, electronics and power generation industries, as well as specialty chemicals, fibers and plastics. It also has retail, sporting goods, safety, supply chain and construction arms.
As of Feb. 3, shares of Honeywell were trading at $173.56 each for a market cap of $123.99 billion. It has a price-earnings ratio of 20.26, a cash-debt ratio of 0.66 and a return on capital of 166.42%. GuruFocus has assigned it a financial strength rating of 6 out of 10 and a profitability rating of 8 out of 10. According to the Peter Lynch chart, shares are trading slightly above their fair value.
Honeywell’s profits took a hit from an industry-wide slowdown in 2019 as U.S. industrial production growth dropped to 0.8% from the 2018 rate of 3.9%. As you can see in the chart below, this had a significant impact on the company’s top line, although share prices did not suffer as a result.
Honeywell performed well among its peers during the industry-wide slowdown, helped by its diversity and the success of its two largest segments, aerospace and performance materials and technology. It saw consistent organic sales growth averages of approximately 4% per quarter throughout 2019, leading analysts to predict growth for 2020.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Sempra Energy” data-reactid=”90″>Sempra Energy
The fund also established a new position of 99,300 shares in Sempra Energy, impacting the equity portfolio by 0.52%. Shares were trading at an average price of $146.81 during the quarter.
Sempra Energy is a San Diego, California-based company that focuses on electric and natural gas infrastructure. Its focus is on building out sustainable infrastructure to provide electricity for future energy needs.
As of Feb. 3, Sempra Energy’s shares trade at a price of $161.33 each for a market cap of $45.39 billion. The company has a price-sales ratio of 18.46 and an Altman-Z score of 1.12. GuruFocus has assigned it a financial strength rating of 3 out of 10 and a profitability rating of 7 out of 10. The company has been issuing increasing amounts of debt since the 2008 financial crisis.
Operating as a regulated utility, Sempra’s stock has not suffered from the same recent decline as oil and natural gas producers. Over the past decade, shares have returned a cumulative 246% to investors.
Sempra is well-placed to benefit in the long term from growth in demand for natural gas and electric energy sources in the U.S. and South America.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Charles Schwab” data-reactid=”118″>Charles Schwab
Elfun Trusts sold out of its remaining 912,820 shares of Schwab, impacting the equity portfolio by -1.45%. Shares were trading at an average price of $44.34 during the quarter.
Charles Schwab is an online discount brokerage giant that provides a wide range of financial services, including banking, investing and retirement accounts. In October of 2019, both Charles Schwab and its biggest rival, TD Ameritrade (AMTD), cut commission costs for stocks and exchange-traded funds to $0. Soon after, the two companies entered a definitive agreement for Schwab to acquire its rival in an all-stock transaction valued at $26 billion. The deal means the creation of an online brokerage behemoth with approximately $5 trillion in client assets.
As of Feb. 3, Schwab’s shares are trading at $45.88 each for a market cap of $59.06 billion. The company has a price-earnings ratio of 17.12 and a three-year revenue growth rate of 15.8%. GuruFocus has assigned it a financial strength score of 4 out of 10 and a profitability score of 5 out of 10.
Schwab’s top and bottom lines were both negatively impacted by the elimination of commissions for stock and ETF trading. The company sees this change as necessary in order to stay competitive with newer, online-only rivals, though investors may take the concession as a sign that the reign of the old brokerage giants is coming to an end.
Disclosure: Author owns no shares in any of the stocks mentioned.
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<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="This article first appeared on GuruFocus.
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