Why Steve Romick Has So Much Microsoft In Crescent Fund

Updated on

“Thank you, and we do apologize for the technical difficulties that we’re having. I told Mark Landecker we shouldn’t use a Microsoft product to facilitate this call, but you might want to get into that with him in the question-and-answer,” was a tongue-in-cheek gibe at Microsoft by renowned value investor Steve Romick during FPA’s Q3 conference call.

But guess what? Microsoft Corporation (NASDAQ:MSFT) shows up as the top holding (6.82% of portfolio) in Steve Romick’s FPA Crescent Fund (MUTF:FPACX) which had a value of $8.24B as of December 31, 2013.

FPA Crescent Fund

The FPA Crescent Fund (MUTF:FPACX) is categorized as ‘Contrarian Value’ by FPA in their portfolio classifications as shown below:

FPA Crescent Fund’s investment strategy and philosophy

The Fund seeks to generate equity-like returns over the long-term, take less risk than the market and avoid permanent impairment of capital.

  • Absolute value investors. Genuine bargains rather than relatively attractive securities.
  • Long-term focus. Accept short-term underperformance in exchange for long-term success.
  • Macroeconomic view. Incorporate an understanding of the economic environment.
  • Volatility. Volatility creates opportunity, not risk.
  • Downside protection / Risk minimization. Protect capital first and create long-term equity-like returns second. Hoping for the best, while preparing for the worst.

Holdings of the fund as on December 31, 2013

The top ten holdings of FPA Crescent Fund (MUTF:FPACX) are shown below:


The table above covers Q4 2013. The fund holds 40 stocks and its aggregate portfolio value as on December 321, 2013, was $8.24B.

Sector exposure

At 27.27%, the fund’s highest exposure is in information technology, while consumer discretionary is at the bottom of the bottom of the list with 2.29%.

Steve Romick’s rationale for owning Microsoft

Steve Romick said recently in an interview in response to a question about his preference for ‘old-school technology’ stocks such as Microsoft Corporation (NASDAQ:MSFT), Oracle Corporation (NYSE:ORCL) and Cisco Systems, Inc. (NASDAQ:CSCO):

“Microsoft is a business that clearly has some bad news impacting it, and issues surrounding it. You have a management team that hasn’t made the greatest capital-allocation decisions. You have a part of the business that’s devoted to the consumer that is more challenged. You look at PC sales declining, and it begs a number of questions.

But what they do have is … a very good core franchise that benefits from business, whether it be Servers and Tools or Office. When you have 750 million people around the world using Office, it’s not going away overnight. That’s three-quarters of their business, and that’s not going away anytime soon, at least as far as we can see.”

Leave a Comment