Jean-Marie Eveillard’s First Eagle Investment Management recently disclosed its third quarter holdings. It had $20.06 billion under its management at the end of September, spread across 318 stocks. The fund uses a value-oriented strategy and it shows. Eveillard shows a marked tendency toward stocks with long-term performance rather than trying to exploit short-term inefficiencies and bubbles. Eveillard is so serious about value that his investments tend to start with a bottom-up fundamental analysis as well as visiting the prospective company and talking to its management. Eveillard has been successful with his strategy, boasting a 37.9% 5-year cumulative return (2006-2010) compared to the S&P 500’s 12.2%.
Jean-Marie Eveillard’s Top Holdings
Cisco Systems (CSCO) is its new American Express (AXP). AXP was Eveillard’s largest holding at the end of the second quarter. Eveillard cut his stake in AXP during the third quarter by 7.52%, demoting AXP to his fourth largest position. CSCO took the lead position after Eveillard upped his stake in the company by 30.49%. At the end of September, Eveillard had 40,412,972 shares in the company, a stake valued at roughly $626 million or 3.11% of his total portfolio.
Eveillard also changed up his second largest position in the third quarter. At the end of the second quarter, his second largest position was 3M Co. (MMM), but all that changed by the end of September. Eveillard dropped 20.46% of his position in the company during the third quarter. This move elevated Gold Fields Ltd (GFI), his third largest position at the end of June, to his second largest position, even though he had actually cut his stake in the company by 0.84% in the third quarter to 40,341,557 shares. The position was worth $618 million at the end of the third quarter, or roughly 3.08% of his First Eagle Investment Management portfolio.
Eveillard’s Increased Positions
In the third quarter, Eveillard increased his position in FirstEnergy Corp (FE) by 8.92%, bringing his total stake in the company to 12,304,609 shares, valued at $552.6 million or 2.75%. FE had been Eveillard’s seventh largest position at the end of the second quarter. He had 11,296,709 shares or $498.8 million in the company at the end of June. In the third quarter, Eveillard also added to his positions in Google (GOOG), Macy’s (M), ConocoPhillips (COP), Bank of New York Mellon (BNY), Texas Instruments (TXN), NYSE Euronext (NYX), BB&T (BBT), Kraft Foods (KFT), DuPont de Nemours (DD), MetLife (MET) and Lockheed Martin (LMT).
Jean-Marie Eveillard’s Bearish Moves
Eveillard sold out of 31 positions during the third quarter, the largest of which was International Paper (IP). The company had done well after it announced its takeover of Temple-Inland Inc (TIN) (read about it here), but several hedge fund managers have since left the company in the dust. Joining Eveillard in selling off IP are David Tepper’s Appaloosa Management and Joel Greenblatt’s Gotham Capital. Both funds cut their positions in IP during the third quarter, by 34.93% and 50.95% respectively. Eveillard also sold out of his positions in Frontier Communications (FTR), Corning (GLW), Delta Air Lines (DAL), J.C. Penney (JCP), Costco (COST) and KimberlyClark (KMB). Eveillard also reduced several positions during the third quarter. These include: Comcast (CMCSA), 3M Co (MMM), Eastman Chemical (EMN), Pfizer (PFE), Covanta Holding (CVA), AOL (AOL), Temple-Inland (TIN) and Wells Fargo (WFC).
First Eagle has a strong track record and managed to beat the market by around 5 percentage points per year during the past five years. Currently he is reducing his exposure to cyclical stocks a little bit but overall he is overweight in undervalued tech stocks. We believe investors should be able to beat the market by focusing on First Eagle’s top stock picks.