Wedgewood Partners is a new firm that GuruFocus tracks. The
firm manages assets of about $2 billion and employs a long-term,
long-only, value approach for its portfolio of 18-24 stocks. Its
, and it has returns of 38.4% compared to a 1.1% loss for the
S&P 500 cumulatively for the last five years, and 316.1%
compared to 124.3% cumulatively for the last fifteen years.
The firm evaluates prospective investment companies for the
- Barriers to entry
- Threat of substitutes
- Buying power
- Supplier power
- Degree of internal rivalry
Their outlook as of the end of the second quarter is that the
U.S. economy is showing scant growth and approaching a fiscal
cliff, as year-over-year earnings have flat-lined to zero. Their
portfolios, however, are constructed with the prospect of greater
than 50% secular earnings growth rates compared to the S&P
500, and almost 25% secular earnings growth rates compared to the
Russell 1000 Growth Index. They are positioned with a favorable
risk/reward scenario of a 3% discount to the S&P 500's
12-month forward P/E valuation, also.
In the second quarter, the company did not buy any new stocks,
but added to 17 of their portfolio's 19 positions. The largest
new adds were to: Expeditors International of Washington (
), Cognizant Technology Solutions Corp (
), Varian Medical Systems Inc. (
), Qualcomm (
Expeditors International Washington (
Wedgewood Partners added 769,678 shares to its holding of
Expeditors International at an average price of $40 in the second
quarter. It was their lowest average purchase price since they
opened the position in the third quarter of 2011. They have
traded the stock intermittently since before the second quarter
Expeditors International of Washington Inc. is engaged in the
business of providing global logistics services. Expeditors
International of Washington has a market cap of $7.78 billion;
its shares were traded at around $36.6 with a P/E ratio of 21.8
and P/S ratio of 1.3. The dividend yield of Expeditors
International of Washington stocks is 1.5%. Expeditors
International of Washington had an annual average earnings growth
of 14.2% over the past 10 years. GuruFocus rated Expeditors
International of Washington
the business predictability rank of 3-star
Expeditors' stock declined significantly in the second quarter
2012 after it issued first-quarter earnings guidance below
analysts' estimates. It announced it expected net earnings to
fall in the range of $0.35 to $0.37 per share. Analysts were
expecting from $0.40 to $0.45 per share.
The company attributed the downward revision to the "fragility of
the global economy." "Existing customers, particularly airfreight
customers, are shipping at lower volumes than we experienced
during the 2011 first quarter," the company's CEO Peter J. Rose
said in a statement.
The company's actual earnings came in at $0.36 per share, on a 9%
decline in year-over-year airfreight tonnages and 5% increase in
airfreight shipments. In the second quarter, the company reported
$0.39 earnings per share, an 11% decrease compared with $0.44 in
the second quarter of 2011.
Cognizant Technology Solutions Corp (
Wedgewood added 396,700 shares to its holding of Cognizant
Technology Solutions Corp. at an average price of $65. The
company has been adding to the holding quarterly since the fourth
quarter of 2010. This is the largest increase at the lowest
average price since then.
Cognizant Technology Solutions delivers high-quality,
cost-effective, full life cycle solutions to complex software
development and maintenance problems that companies face as they
transition to e-business. Cognizant Technology Solutions Corp has
a market cap of $19.19 billion; its shares were traded at around
$64.26 with a P/E ratio of 20.6 and P/S ratio of 3.1. Cognizant
Technology Solutions Corp had an annual average earnings growth
of 38.5% over the past 10 years. GuruFocus rated Cognizant
Technology Solutions Corp
the business predictability rank of 4.5-star
Cognizant also experienced a dramatic drop in share price in the
second quarter after lowering its fiscal year 2012 guidance. It
announced it is expecting revenue growth of 20% for the year, to
$7.34 billion; it previously anticipated 23% revenue growth
compared to 2011, to $7.53 billion. In 2011, its revenue grew 33%
from 2010. In the second quarter, it reaffirmed its full-year
During the first quarter, the company repurchased $43 million
worth of shares and expanded the repurchase program to $1
billion. It had bought back $423 million worth of shares as of
May 7. It repurchased a further $358 million of shares in the
The company is flourishing during the market downturn as clients
want more of its efficiency-enhancing services in such times.
Varian Medical Systems Inc. (
Wedgewood added 353,218 shares to its holding of Varian Medical
Systems at an average price of $63 in the second quarter. It has
been adding to its holding of Varian quarterly since the first
quarter of 2011.
Varian Medical Systems Inc. of Palo Alto, Calif., is the world's
supplier of equipment and software for treating cancer. Varian
Medical Systems Inc. has a market cap of $6.56 billion; its
shares were traded at around $59.68 with a P/E ratio of 16.1 and
P/S ratio of 2.5. Varian Medical Systems Inc. had an annual
average earnings growth of 17.9% over the past 10 years.
GuruFocus rated Varian Medical Systems Inc.
the business predictability rank of 4.5-star
In the second quarter, the company revised its outlook for
earnings per share from continuing operations to increase by 8 or
9 percent, from its previous estimate of 9 to 12 percent growth
over fiscal 2011 totals.
Wedgewood added 356,279 shares of Qualcomm at an average price of
$61 in the second quarter, its largest purchase since it began
adding shares every consecutive quarter since the fourth quarter
of 2010 at an average price of $47.
Qualcomm Inc. develops and delivers innovative digital wireless
communications products and services based on the company's CDMA
digital technology. Qualcomm Inc. has a market cap of $105.36
billion; its shares were traded at around $60.9 with a P/E ratio
of 19.5 and P/S ratio of 7. The dividend yield of Qualcomm Inc.
stocks is 1.6%. Qualcomm Inc. had an annual average earnings
growth of 18.2% over the past 10 years. GuruFocus rated Qualcomm
Inc. the business predictability rank of 3.5-star.
In April, the stock's price declined when it issued financial
guidance below analysts' estimates. The company said it expects
for 2012 revenues of $3.61 to $3.76, compared to estimates of
$3.77, according to Reuters.
Wedgewood commented the following on Qualcomm in its second
) also detracted from performance during the quarter,
particularly after the company disclosed that one of its
suppliers of silicon wafers, specifically at the 28 nanometer
process node, was struggling to keep up with demand and would
serve to limit revenue growth for the fiscal year ending
September 2012. Qualcomm mentioned that it has committed
additional expenses towards supply procurement and expects the
supply shortage to ease by the December quarter. With one of the
largest net cash balances in Corporate America and ample free
cash flow generation, the company has enough resource to
aggressively address this problem. We added to the Qualcomm
position during the quarter, as the stock was trading at the
lower-end of its historical valuation range.
Qualcomm had $14.6 billion in cash and generated $523 million in
the second quarter.
See Wedgewood Partners' portfolio here. Also check out the
Undervalued Stocks, Top Growth Companies and High Yield stocks of
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