First Eagle Investment (Trades, Portfolio) Management recently released its 13F report for the first quarter of 2023, which ended on March 31.
The firm takes a long-term, flexible, absolute return-oriented investment approach that does not attempt to beat the benchmark. Instead, it seeks to achieve attractive returns while providing downside protection. The firm’s portfolio managers operate a variety of funds under the leadership of president and CEO Mehdi Mahmud.
According to its 13F report for the first quarter of 2023, the firm’s top five trades were mostly sells. It sold out of its stakes in Wells Fargo & Co. (WFC, Financial) and The Travelers Companies Inc. (TRV, Financial) and reduced its holdings of Fidelity National Information Services Inc. (FIS, Financial) and D.R. Horton Inc. (DHI, Financial), with the only buy in the quarter’s top five trades being an addition to Medtronic PLC (MDT, Financial).
Investors should be aware that 13F reports do not provide a complete picture of a guru’s holdings. They include only a snapshot of long equity positions in U.S.-listed stocks and American depository receipts as of the quarter’s end. They do not include short positions, non-ADR international holdings or other types of securities. However, even this limited filing can provide valuable information.
Wells Fargo
The firm sold all 9,421,196 of its Wells Fargo (WFC, Financial) shares, which previously took up 1.07% of the equity portfolio. During the quarter, shares traded for an average price of $43.59.
Wells Fargo is a U.S. bank major headquartered in San Francisco. It is the fourth-largest bank in the U.S. by assets. Like its peers, the bank earns most of its revenue from loans and credit cards, though it is subject to an asset cap following its fake accounts scandal back in 2016.
Several other notable guru investors have sold out of Wells Fargo in the past couple of years, including Warren Buffett (Trades, Portfolio), Ray Dalio (Trades, Portfolio)'s Bridgewater Associates and Steven Cohen (Trades, Portfolio). It is possible that, aside from its asset cap woes, investors are also wary of the bank’s high exposure to mortgages amid an anticipated correction in the housing market. The GF Value chart rates the the stock modestly undervalued.
The Travelers Companies
The firm also exited its 1,502,362-share investment in The Travelers Companies (TRV, Financial), which shaved off 0.78% of the equity portfolio at the quarter’s average share price of $181.84.
The Travelers Companies is a New York-based insurance company that serves as the second-largest writer of U.S. commercial property casualty insurance as well as the sixth-largest writer of U.S. personal insurance through independent agents.
The company has a solid return on equity of 12.39%, which is better than the insurance industry median. The three-year revenue per share growth rate of 8.5% is also a positive, though the three-year earnings per share growth rate is lower at 5.9%. The GF Value chart considers the stock fairly valued.
Fidelity National Information Services
First Eagle cut its Fidelity National Information Services Inc. (FIS, Financial) position by 96.29%, slimming the equity portfolio by 0.46% and leaving a remaining stake of 96,094 shares. During the quarter, the stock price averaged $65.09.
Fidelity is the leading provider of title insurance and settlement services to the real estate and mortgage industries in the U.S. Thus, it benefitted massively from the hot housing market and low mortgage rates while they lasted. To maintain and expand its market leadership, Fidelity has been investing in real estate technology.
The danger with this stock is that it is tied very closely to the cyclical housing market. We can see this risk clearly in how the stock has cratered this year due to the housing market slowdown. The GF Value chart rates the stock as a possible value trap.
D.R. Horton
The firm cut its D.R. Horton Inc. (DHI, Financial) holding by 83.03%, shaving 0.38% off the equity portfolio and leaving a remaining holding worth 318,713 shares. The stock changed hands for an average price of $95.36 per share during the quarter.
Headquartered in Arlington, Texas, D.R. Horton is the largest homebuilder in the U.S. by number of closings. It builds new homes and sells both new and old homes through four brands: Express, Emerald, Freedom and D.R. Horton, which are all marketed toward different age and wealth demographics.
D.R. Horton has seen incredible growth recently, boasting a three-year earnings per share growth rate of 56.7% at an operating margin of 19.75% as the low interest rates of the pandemic era met with over a decade of underbuilding in the U.S. housing market. The GF Value chart rates the stock as fairly valued.
Medtronic
First Eagle upped its stake in Medtronic (MDT, Financial) by 153.88%, adding 0.71% to the equity portfolio at the quarter’s average share price of $81.50 and bringing the total number of shares owned up to 5,485,339.
Medronic is an Irish-American medtech company that develops and sells a wide variety of medical devices to treat over 70 conditions. The company is best known for its revolutionary cardiac devices, including battery-powered and miniature pacemakers. It also produces insulin pumps and diabetes therapies. A focus on chronic conditions allows Medtronic to generate high recurring revenues.
Medtronic’s growth slowdown has led to the stock trading more cheaply than it did in the past, which could make it attractive for value investors who expect growth to pick back up again. The forward price-earnings ratio is just 16.59, and the GF Value chart rates the stock as modestly undervalued.
See also
At the end of the quarter, First Eagle Investment (Trades, Portfolio) held 395 stocks in a 13F portfolio valued at $37.82 billion. The firm’s top holdings were Oracle Corp. (ORCL) with 5.08% of the equity portfolio, Exxon Mobil Corp. (XOM) with 3.90% and SLB (SLB).
In terms of sector weighting, the firm was most invested in technology, basic materials and energy.
