Tracking The Parnassus Core Equity Fund - Q4 2015 Update

| About: Parnassus Core (PRBLX)

Summary

Including dividends, total return for the 4th quarter was 4.79%, versus 7.04% for the S&P 500 and 4.57% for the Lipper Equity Income Fund Average.

The top 10 holdings (36.9% of fund) are: Danaher, Alphabet, Motorola Solutions, Mondelez, Procter & Gamble, Intel, United Parcel Service, Xylem, V.F. Corp., and Gilead Sciences.

During the fourth quarter, the fund added V.F. Corp, making it its ninth largest position. It also sold its stake in Accenture.

This series tracks the Parnassus Core Equity Fund (PRBLX, PRILX). I describe the fund in a previous article, which you can find here, or you can check out its website here.

Over the past 10 years, the fund returned 9.89% versus 7.30% for the S&P 500.

For the year, the fund lost 0.55% versus a gain of 1.39% for the S&P 500 and a loss of 3.66% for the Lipper Equity Income Fund Average.

The fund noted in its annual report that its relative performance suffered from the gains of Amazon (NASDAQ:AMZN) and Facebook (NASDAQ:FB), which were in the index but not its fund.

For the year the biggest winners for the fund were Alphabet (GOOG, GOOGL), Mondelez (NASDAQ:MDLZ), and Allergan (NYSE:AGN). The biggest detractors were National Oilwell Varco (NYSE:NOV), Pentair (NYSE:PNR), and Shaw Communications (NYSE:SJR).

The fund believes the issues for both National Oilwell Varco and Pentair are cyclical, and both are at attractive valuations right now.

Here's the activity for the fourth quarter of 2015.

New Stakes:

VF Corp. (NYSE:VFC) designs and manufactures branded apparel, footwear, and accessories in the US and Europe. It sells under several brands, including North Face, Vans, Timberland, Wrangler and Eastpak. The fund bought just over 5.7 million shares during the quarter, making VF Corp. at top 10 position. Prices ranged from $62 to $74. According to the fund, it bought at an average price of $63. It likes VF Corp. for its growth potential, commitment to corporate responsibility and excellent management team, and hopes to own the position for many years. At a recent price of $59, there's an opportunity to get into VF Corp. below the average price the fund paid.

Stake Increases:

Praxair (NYSE:PX) is a chemicals company that produces, sells, and distributes specialty gases as well as surface coatings. The fund established its position in Praxair in 2009. They liked the producer of industrial gases for its long-term customer contracts that produced solid cash flows. The position was built up to 1 million shares by the end of 2012 and maintained in 2013. In the second quarter of 2014, the fund increased its stake by 22.7%, making PX 2.7% of the portfolio. During the first quarter of 2015, it added 758k shares, bringing the total to 2.85 million. Prices ranged from $120 to $130. In the fourth quarter, the fund added nearly 592k shares, boosting the position by 20.7%. Prices ranged from $100 to $118. Praxair is now 2.96% of the portfolio.

Apple (NASDAQ:AAPL) is a consumer electronics company. The fund established its position in the 2nd quarter of 2013 at an average price of $395.02 (split-adjusted $56.43). It likes the company for its strong cash flow, loyal customer base, innovation and the potential of new product categories. The position was trimmed by 13.1% in the third quarter of 2014. Prices ranged from $90 to $103. The fund sold more in the fourth quarter of 2014 - 1.5 million shares, or roughly 38% of the position. Prices ranged from $96.26 to $119.00. The fund was adding this quarter for the first time since 2013. It added 492k shares to the position - an 18% increase. Prices ranged from $105 to $123.

Questar (NYSE:STR) is an integrated natural gas company in the US with operations in Utah, Wyoming and Idaho. The fund established a 2.8 million share position in the last quarter of 2010 and built the position to over 7.2 million shares by the end of 2011. Prices ranged from $16.50 to $20 during this time. Over 2012 through 2014, the fund added 1.5 million shares. It has being buying more every quarter in 2015, adding nearly 4 million shares. In the quarter, the fund added just over 2 million shares, as prices ranged from $18 to $21.25. On February 1st, Dominion Resources (NYSE:D) offered $25 per share to buy Questar.

PayPal Holdings (NASDAQ:PYPL), Perrigo (NASDAQ:PRGO), Verisk Analytics (NASDAQ:VRSK), eBay (NASDAQ:EBAY), Deere & Co. (NYSE:DE), Patterson Companies (NASDAQ:PDCO), MDU Resources (NYSE:MDU), National Oilwell Varco and CVS Health (NYSE:CVS) saw minor (less than 15%) increases in their stakes during the fourth quarter of 2015.

Stake Disposals:

Accenture (NYSE:ACN) provides management consulting, technology, and outsourcing services worldwide. The fund first purchased a small stake in ACN in the 4th quarter of 2007. The position was built up to 2.4 million shares by the end of 2009. By the end of 2011, the position stood at 1.0 million shares and stayed there through 2013. In 2014, the fund more than doubled its stake to 2.1 million shares, with prices mostly in the $75-85 range. The fund sold its entire position in the last quarter of 2015. Prices ranged from $96 to $110.

Stake Decreases:

Allergan develops pharmaceuticals and medical devices for therapeutic and cosmetic purposes. It's best known for Botox. The fund established a 2.3 million share position in the fourth quarter of 2013. Prices ranged from $88.48 to $111.08. The fund sold 845k shares, or 31% of its stake, in the fourth quarter of 2014. Prices ranged from $176.86 to $214.00. In the first quarter of 2015, Actavis completed the acquisition of Allergan. Per the terms of the acquisition, Allergan shareholders received 0.3683 of an Actavis ordinary share and $129.22 in cash for every share owned. The combined company also retained the Allergan name. Over the second quarter of 2015, the fund sold just over 615k shares, or 34.5% of the position, as prices traded between $280 and $315. In the fourth quarter, it sold another 265k shares, reducing the position by 22.7%. Prices ranged from $240 to $320.

Novartis (NYSE:NVS) is a pharmaceutical company operating in branded drugs, generics, and consumer products. The fund started buying Novartis in the third quarter of 2011, picking up 1.25 million shares. By the end of 2012, it owned 1.6 million shares. Prices were generally in the $55-60 range during this time. In 2013, it added 175k shares. Its last purchase was 675k shares in the second quarter of 2014, when prices traded between $82 and $91. The stock did reach $105 at one point during 2015, but has since turned sharply lower. The fund sold 450k shares in the fourth quarter, when prices traded between $84 and $95. The stock is now trading at $74.

Motorola Solutions (NYSE:MSI) is a data communications and telecommunications equipment provider. The fund started acquiring MSI in the second quarter of 2012, buying 1.8 million shares. Prices traded in the mid-$40s. The fund has kept on adding to the position, and at the end of the second quarter 2014, it stood at 4.9 million shares, or 3.3% of the portfolio. The fund added 1.5 million shares over the third quarter of 2014 as prices ranged from $58.75 to $67.50. During the fourth quarter of 2015, it sold nearly 1.5 million shares. Prices ranged from $64 to $73. Motorola Solutions had grown to the fund's largest position last quarter at 5.5% of the portfolio. Now, it's the third-largest position at 4.3% of the portfolio.

Kept Steady:

Compass Minerals (NYSE:CMP), Procter & Gamble (NYSE:PG), Charles Schwab (NYSE:SCHW), MasterCard (NYSE:MA), McCormick (NYSE:MKC), Mondelez, PepsiCo (NYSE:PEP), Sysco (NYSE:SYY), WD-40 (NASDAQ:WDFC), Danaher (NYSE:DHR), Pentair, Xylem (NYSE:XYL), Alphabet, Northwest Natural Gas (NYSE:NWN), Gilead Sciences (NASDAQ:GILD), Iron Mountain (NYSE:IRM), Applied Materials (NASDAQ:AMAT), Intel (NASDAQ:INTC), Thomson Reuters (NYSE:TRI), Shaw Communications, United Parcel Service (NYSE:UPS), AGL Resources (NYSE:GAS) and Waste Management (NYSE:WM) remained unchanged for the quarter.

Here's a snapshot of the changes from the third to the fourth quarter of 2015:

PRBLX Q4 2015 Click to enlarge

Disclosure: I/we have no positions in any stocks mentioned, but may initiate a long position in AAPL, INTC, GOOGL, GILD over the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.