Tracking The Parnassus Core Equity Fund

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Includes: AAPL, ACN, AGN, AMAT, CHRW, CMP, CVS, EBAY, EGN, ENB, EXPD, GAS, GILD, IRM, MA, MDLZ, MDU, MKC, MSI, NOV, NVS, NWN, PDCO, PEP, PG, PNR, PRGO, PX, QCOM, SCHW, SJR, STR, SYY, TFX, TRI, UPS, VRSK, WDFC, WM, XYL
by: V is for Value

Summary

Including dividends, total return for the 3rd quarter was a loss of 0.55% versus a 1.13% gain for the S&P500. The number of positions increased from 40 to 41.

The top 10 holdings (35.9% of fund): AGN, MSI, AAPL, AMAT, PG, PNR, QCOM, GILD, EBAY, MDLZ.

The fund took a sizable new position in EBAY, making it the ninth largest position in the fund.

The Parnassus Core Equity Fund is a large-cap fund that invests at least 75% of the fund's total assets in dividend paying stocks. Its picks are fundamentally driven. It looks to own good businesses at attractive valuations and use a three-year investment horizon.

A unique feature of Parnassus is that it uses the "Responsible Investment Approach." This is where a company analyzes the company's environmental, social and governance (NASDAQ:ESG) factors. That means companies with ESG risks are eliminated from consideration. The benefit is companies that are identified as socially responsible are less likely to encounter stock price damaging events in the future.

The fund's historical performance shows the theory may have merit. Over the past 10 years the fund returned 10.3% versus 7.8% for the S&P 500.

At the end of the third quarter the fund had the heaviest weighting in information technology (23.4%), consumer staples (16.5%), and healthcare (15.9%).

Per the fund the biggest winners over the third quarter were Gilead Sciences (NASDAQ:GILD), Apple (NASDAQ:AAPL), and eBay (NASDAQ:EBAY). The biggest losers were MDU Resources (NYSE:MDU), Energen Corp. (NYSE:EGN), and Mondelēz International, Inc.(NASDAQ:MDLZ)

New Stakes:

(NASDAQ:PRGO): Perrigo Company is an over-the-counter and generic drug manufacturer based out of Dublin, Ireland. The fund bought just over 1 million shares in the third quarter, 1.51% of the portfolio. Prices ranged from $139.00 to $158.85. The fund likes Perrigo because it's a play on two big trends; an aging population and the pressure to lower healthcare costs.

(EBAY): eBay is an online marketplace and platform. The fund bought a little over 5 million shares for a 2.85% position in the portfolio. That makes it the ninth largest position in the portfolio. Prices ranged from $50.18 to $56.63. The fund said it was buying in July, when the stock traded between $50.18 and $53.23. eBay was down on concerns over sales growth and the PayPal spin-off. The fund felt there was a compelling risk to reward profile in eBay.

Stake Increases:

(NASDAQ:QCOM): QUALCOMM is a digital communications products and services company. The fund established its position in QUALCOMM in the 4th quarter of 2009 with 1.5 million shares. The position was built up to 2.75 million in 2010 but then trimmed in 2011, ending the year with 1.5 million shares. Since then the fund has continued to build its position and held 3.7 million shares at the end of the 2nd quarter. The fund added over 900k shares in the third quarter, increasing its position 25% to 3.43% of the portfolio. Prices ranged from $72.49 to $81.60. We'll see if the fund continues to add in the fourth quarter, as QCOM trades below $70 at the time of this writing.

(NYSE:PNR): Pentair is an industrial manufacturing company specializing in valves, fittings, automation and controls. The fund likes Pentair for its exposure to water infrastructure. The fund first established a position of 800,000 shares in 2008. It held about 1 million shares through 2011 and then significantly increased the position to 3.2 million shares by the end of 2013. In the second quarter it added 23% to the position. It was adding again in the third quarter, buying over 1.3 million shares and increasing the position by another 35%. Prices ranged from $63.65 to $73.22. PNR now makes up 3.44% of the portfolio.

(MDU): MDU Resources is a diversified utility company focused on electricity, natural gas, construction, exploration and production, and pipelines. MDU is a long-time holding of the fund. It started buying in the last quarter of 2008 with 1.5 million shares. It has steadily acquired over the years and it had 6.1 million shares as of the second quarter. Over the third quarter the fund bought just over 1.5 million shares, increasing the position 24.8% to 7.6 million shares. Prices ranged from $27.60 to $34.92. The position now makes up 2.11% of the portfolio.

(NYSE:IRM): Iron Mountain is a records and information management services company. The fund first entered IRM in the last quarter of 2010, buying 1.2 million shares. The fund has built up the position since then and owned just under 7 million shares at the end of the second quarter. It was around this time IRM was granted REIT status. It has since raised the quarterly dividend to $0.475 and paid a special dividend of $3.62. Over the third quarter the fund added another 1.6 million shares, increasing its stake by 23%. Prices ranged from $31.90 to $36.22. The IRM position now makes up 2.79% of the portfolio.

(NYSE:MSI): Motorola Solutions 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 40's. 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, increasing the position by 31.1%. The position now accounts for 4.01% of the portfolio.

McCormick (NYSE:MKC), Mondelez (MDLZ), Sysco (NYSE:SYY), WD-40 Co. (NASDAQ:WDFC), Verisk Analytics (NASDAQ:VRSK), Patterson Co. (NASDAQ:PDCO), Northwest Natural Gas (NYSE: NWN), Allergan (NYSE: AGN), Novartis (NYSE:NVS), Thomson Reuters (NYSE:TRI), and Questar Corp. (NYSE: STR) saw minor (less than 10%) stakes increases in the 3rd quarter.

Stake Disposals:

(NASDAQ:CHRW): The fund first entered CH Robinson Worldwide in the third quarter of 2012, buying 2.3 million shares. It built up the position to 6.2 million shares by the end of 2013. Prices during this time ranged from $52 to $68 but spent most of the time trading between $56 and $62. The fund has been selling over 2014 and sold its remaining 4 million shares in the third quarter. Shares in the third quarter traded between $64 and $74. Per the fund it did book a modest gain on the position. It exited over its concerns that CHRW would not be able to maintain its edge in technology.

Stake Decreases:

(AAPL): 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% this quarter. This is the second quarter in a row the fund has trimmed its position, although it is still the fund's third largest holding at 4.0% of the portfolio.

No stocks saw minor (less than 10%) stakes decreases in the 3rd quarter.

Kept Steady:

Compass Minerals (NYSE: CMP), Praxair (NYSE:PX), Accenture (NYSE:ACN), Procter & Gamble (NYSE:PG), Charles Schwab (NYSE:SCHW), MasterCard (NYSE: MA), PepsiCo (NYSE: PEP), Xylem (NYSE: XYL), Google (NASDAQ: GOOG and GOOGL), Teleflex Inc. (NYSE: TFX), Energen Corp. (EGN), Spectra Energy (NY: SESE), National Oilwell Varco (NYSE:NOV), Gilead Sciences (GILD), CVS Health (NYSE:CVS), Applied Materials (NASDAQ: AMAT), Shaw Communications (NYSE:SJR), Expeditors International (NASDAQ: EXPD), United Parcel Service (NYSE:UPS), AGL Resources (NYSE: GAS), and Waste Management (NYSE: WM) remained unchanged for the quarter.

PRBLX Q3 2014

Disclosure: The author is long AAPL, IRM.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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