Steven Romick, chartered financial analyst and senior vice president of FPA Crescent Fund (MUTF:FPACX), has taken the company to new heights with the recent purchase of shares in Google Inc (NASDAQ:GOOG), WellPoint, Inc. (NYSE:WLP), Bank of America Corp (NYSE:BAC) and Interpublic Group of Companies, Inc. (NYSE:IPG) stocks. The California based firm holds $19.3 billion assets under management. Romick says he prefers owning stock over sitting on a lot of cash when the risk of inflation seems imminent.
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Romick has been with FPA Crescent since its inception in 1993. Before joining Crescent, Steve Romick served as chairman of Crescent Management and was a consultant for Kaplan, Nathan & Co. Dennis Bryan and Rikard Ekstrand joined FPA as analysts in the year 2000. The fund has realized returns of 5.18 percent during the past year, and just over 18 percent over the past three years.
Typically, the fund holds approximately 20 to 25 percent of its assets in cash. The majority of the portfolio is devoted to domestic and foreign stocks in addition to several corporate and government bonds. FPA Crescent is a huge investor in healthcare, financial services, consumer services and in the energy sector.
Steven Romick has described the company as a “free range chicken.” This doesn’t mean the fund exclusively holds organic farming ventures, but rather that it is “chicken” or cautious with its investments because they don’t like to lose money, and “free range” because they value the ability to go anywhere.
As of March 2012, the Crescent fund held assets totaling nearly $8 billion spread across 128 different investment holdings.
In September 2010, 33 percent of the company’s assets where in cash. At that time Romick said the fund could be more invested, but denied suggestions by analysts that this was a defensive strategy. He claimed it was merely a matter of price.
Romick picked up several high yield corporate bonds in 2009, which buoyed the company, but had the bond issuers rallying. Since then he has decreased his stake in that area, but continues to dabble with distressed mortgage bonds. According to FPA Crescent’s annual report, Romick is no longer “trolling obscure waters” in search of valuable investments, but rather focusing his energy on finding blue chip opportunities with a substantial global impression.
An example of this is the company’s recent investment in Anheuser-Busch, the largest beer producer in the world with stakes in large international beer markets such as the U.K. and Brazil.
Steve Romick’s style of investing has been described as a perfect balance between opportunism and extreme caution. He sits on the company’s cash assets during tough times, waiting for just the right opportunity. Romick is famous for recognizing a good deal. He is a bargain hunter that thrives on finding the diamond in the rough, but he also likes to maintain good stake in steady earners – established companies like Kraft and Wal-Mart.
Unlike most allocation funds that like to keep their portfolio’s fairly static, Romick likes to remain flexible and invest in good prospects in various forms of assets. This wide diversity shelters the fund from much of the stock market’s volatility, although fluctuations may still affect performance from time to time.
FPA Crescent Fund’s portfolio positioning in the first quarter looks like this:
- 64.29 percent long common stock
- – 3.4 percent in short common stock
- 2.88 percent total corporate bonds
- 0.7 percent limited partnerships
- 0.12 percent derivatives and futures
- 0.2 percent preferred stock and convertible bonds
- 1.6 percent securities backed by mortgages
- – 0.8 percent short bonds and notes
- 9 percent U.S. agency and government securities
- 24.63 percent in cash and liquid assets
In 2011, the Crescent Fund saw returns of approximately 5 percent. In the past years, the company has had cumulative gains of 25.6 percent.
During the first quarter of 2012 (which were just released in a 13-F filling), Romick added to the portfolio with 955,000 shares of WellPoint, Inc. (NYSE:WLP) at $63 per share and three additional stock investments – Interpublic Group of Companies, Inc. (NYSE:IPG), Google Inc (NASDAQ:GOOG) and Bank of America Corp (NYSE:BAC).
Google Inc (NASDAQ:GOOG) was Romick’s largest new purchase. He bought 105,200 shares of the internet giant for an average cost of $577 per share. This investment now makes up 1.3 percent of the company’s portfolio. The 2,940,000 shares he bought of Bank of America Corp (NYSE:BAC) for an average cost of $7.34 each, makes up 0.54 percent.
The largest holding in the FPA Crescent Fund portfolio is ENSCO PLC (NYSE:ESV).
ENSCO PLC (NYSE:ESV) provides offshore contract drilling services to the international gas and oil industry. It has a market cap of $8.19 billion. Shares of the company are traded around the $57.46 mark with a P/E ratio of 15.1 and a P/S ratio of 4.7. Dividends in the company yield an average of 1.8 percent. ENSCO PLC (NYSE:ESV) has seen an annual growth in earnings averaging 23.9 percent over the past ten years.