Analysis of Top New Conviction Buys and Sells by Award-Winning First Eagle Funds

by: GuruFundPicks

New York-based investment management firm First Eagle Investment Management, LLC (FEIM) serves as the adviser to the First Eagle series of Mutual Funds and manages over $56.4 billion of which almost $19 billion is deployed in U.S. exchange traded equities per their latest 13-F filing for the March 2011 quarter. The First Eagle Funds and their long-time Portfolio Manager and now Senior Adviser Jean-Marie Eveillard have been the recipient of many industry awards since their first U.S. mutual fund was launched by Eveillard in 1987.

Recently, for example, their flagship $29 billion First Eagle Global Fund won two Lipper Fund Awards for 2011 as the Best Global Flexible Fund for five- and 10-year periods, a distinction they have won for three years in a row since 2008. Furthermore, Mr. Eveillard was awarded the Lifetime Achievement Award in 2010 from Fund Action & Fund Directors; the Graham & Dodd, Murray Greenwald Prize for Value Investing in 2008; the Lifetime Achievement Award from Morningstar in 2003; and Morningstar’s International Manager of the Year award in 2001. Long-term, their flagship Global Fund has returned 66-fold since 1979, and over the last ten years they have delivered 11.3% compound annual growth which is well above the 1.31% CAGR for the S&P 500 during that same period. Their 2nd largest fund, the $10.3 billion Overseas Fund has also returned a stellar 11.8% over the last ten years.

The fund holds a diversified portfolio of 365 positions, and almost 60% of their holdings are in large-caps, over 30% are in mid-caps, and small-caps account for the remaining five to ten percent of their holdings. Their portfolio turnover is around 40% implying an average holding period of two to three years. Based on the most recent SEC 13-F filing for the March 2011 quarter, we determined that their portfolio is over-weight in the Basic Materials, Services and Utility Sectors, and it is under-weight the Healthcare, Energy, Technology and Consumer Sectors.

Within Sectors, at a more disaggregated level, my prior analysis of their SEC 13-F filings for the December 2010 quarter had revealed that they were over-weighted in the Gold and Silver Mining Industry, the Semiconductor Manufacturing Industry, the Midstream and Downstream Oil and Gas Industry Group, and the Commercial Services Industry Group. Based on a review of the most recent SEC 13-F filing for the March 2011 quarter, we determined that they continue to be over-weighted all four of the above industry groups.

The following summarizes their new picks and pans in the latest reported 13-F filing for the March 2011 quarter:

  • Sysco Corp. (NYSE:SYY) distributes food and related products to the food-service industry via 180 distribution centers in the U.S. and Canada. This is a high conviction buy for First Eagle. They added $225 million to their position during the quarter and now own $443 million worth, having initiated the position at the end of 2009 at prices slightly below current levels.
  • Apache Corp. (NYSE:APA) is engaged in the exploration and production of crude oil, natural gas liquids and natural gas globally. First Eagle cut their prior position by half during the quarter, selling $211 million worth. This position was initiated in mid-2006 probably in the $60s, and with the stock trading at almost double that price, their selling of half the position while significant is just normal profit taking and not a conviction sell.
  • Colgate Palmolive Co (NYSE:CL) manufactures toothpaste, toothbrushes, dishwashing liquid, fabric conditioner, shampoos, soaps and pet nutrition. This is a new large $210 million buy at prices near all-time highs and a high conviction buy by them.
  • BB&T Corp. (NYSE:BBT) is a holding company for branching banking and trust company and subsidiaries with 1,782 offices in 12 states and Washington D.C. This too is a new large $166 million buy and a conviction buy by them.
  • Kinder Morgan Inc. (NYSE:KMI) provides natural gas transportation and storage services in North America. This too is a new large $156 million buy and a conviction buy by them.
  • Weyerhaeuser Co (NYSE:WY) manufactures wood products, container-board and cellulose paper for the construction and industrial markets. First Eagle initiated the position in mid-2006 probably in the $60s so their selling of a significant chunk of it as such low levels at current prices in the low-$20s is a conviction sell.
  • Cisco Systems Inc. (NASDAQ:CSCO) manufactures switches, routers, and other networking and communications hardware for business and home applications. First Eagle initiated the position in early-2008 probably in the mid-$20s, and they have been on the wrong side of this position as the stock has continued to be weak since then. Hence, First Eagle adding $138 million to a $163 million position from the prior quarter does not carry much informative value.
  • US Bancorp Inc. (NYSE:USB) is a holding company for U.S. Bank operating through 3,482 branches in 24 mid-western and western states. First Eagle initiated this position in mid-2006 probably in the low-$30s and the stock has been volatile since then trading between $8 and $42, so the selling of most of their stock after all that volatility does not carry much informative value as they could have sold for many reasons that may have less to do with their conviction about the stock.
  • CBS Corp CLB (NYSE:CBS) is a global media company engaged in television and radio broadcasting, motion picture production, publishing and advertising. The sell-out of this position too does not carry much informative value. They initiated the position in mid-2006 in the mid-$20s, and the stock has traded between $4 and $35 since then; recently, however, it has gone up from less than $4 in early 2009 to almost $30, so the sell-out is probably just some profit taking after all that volatility.
  • Metlife Inc. (NYSE:MET) offers life, non-medical health, auto and home-owners insurance, annuities and other financial services. This position too was initiated in mid-2006, and has gone up almost four-fold since the $12 lows in early 2009, so their buying more shares at these levels is a conviction buy by them.
  • Gold Fields Ltd. ADR (NYSE:GFI) is a South African Company engaged in the exploration and extraction of gold in South Africa, Ghana, Australia and Peru. This is a high conviction holding as it is their largest position and at $693 million, they hold almost 6% of the shares.
  • American Express Co. (NYSE:AXP) provides charge and credit payment card products and travel-related services to consumers and businesses worldwide. This too is a conviction holding as it is their second largest holding at $533 million, and they added $27 million to the position during the quarter while it has recently gone up five-fold since the lows in early 2009.
  • ConocoPhillips (NYSE:COP) is engaged in the exploration, production, mid-stream, refining and marketing of crude oil and natural gas worldwide. This too is a conviction holding as it is their third largest holding at $516 million, and they added $20 million to the position during the quarter while it has recently doubled since the lows in early 2009.
  • Grupo Televisa SA (NYSE:TV) produces and broadcasts Spanish language TV programming in Mexico. This too is a conviction hold. They initiated the position in mid-2009 in the mid-teens. It is their fourth largest position at $483 million, and they added $89 million in the quarter while the price has gone higher to the mid-$20s.




New or Increased or Decreased or Unchanged Position

Market Value at end of March 2011 Quarter

Change in Value from Prior Quarter

Top New Picks and Pans

Sysco Corp.



$ 442.95 million

$ 225.06 million

Apache Corp.



$ 282.39 million

$ 210.94 million

Colgate Palmolive Co.


New Position

$ 210.47 million

$ 210.47 million

BB&T Corp.


New Position

$ 166.44 million

$ 166.44 million

Kinder Morgan Inc.


New Position

$ 156.22 million

$ 156.22 million

Weyerhaeuser Co.



$ 383.88 million

$ 145.9 million

Cisco Systems Inc.



$ 301.3 million

$ 137.51 million

Us Bancorp



$ 65.26 million

$ 133.42 million

CBS Corp.



$ 0 million

$ 124.28 million

Metlife Inc.



$ 120.44 million

$ 119.98 million

Largest Holdings

Gold Fields Ltd.



$ 693.92 million

$ 4.83 million

American Express Co.



$ 532.65 million

$ 27.13 million




$ 516.13 million

$ 20.46 million

Grupo Televisa SA



$ 483.33 million

$ 89.17 million

Credit: Historical fundamentals including operating metrics and stock ownership information were derived using SEC filings data, I-Metrix by Edgar Online, Zacks Investment Research, Thomson Reuters and The information and data is believed to be accurate, but no guarantees or representations are made.

Disclaimer: Material presented here is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. Further, these are my 'opinions' and I may be wrong. I may have positions in securities mentioned in this article. You should take this into consideration before acting on any advice given in this article. If this makes you uncomfortable, then do not listen to my thoughts and opinions. The contents of this article do not take into consideration your individual investment objectives so consult with your own financial adviser before making an investment decision. Investing includes certain risks including loss of principal.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.