This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Top Investor Avoids Energy, Buys Microsoft

BOSTON ( TheStreet) -- Eric Schoenstein, whose Jensen Portfolio (JENSX) has more than doubled the returns of the S&P 500 Index over five and 10 years, is avoiding energy stocks such as Exxon Mobil (XOM) and Marathon Oil (MRO) and sticking to large-caps including Microsoft (MSFT - Get Report), PepsiCo (PEP - Get Report) and 3M (MMM).

Schoenstein and his fellow managers couldn't be more contrarian, as investors move into the riskiest assets, including little-known metals to small-cap tech firms to emerging-markets exchange traded funds. In the fourth quarter, energy was the best-performing sector in the S&P 500, and the Jensen Portfolio was held back as a result.

The Jensen Portfolio returned 9.3% in the three months through December, trailing the S&P 500's gain of 10.8%. Exxon and Marathon are up more than 30% over the past six months, outpacing the broader market. The turmoil in Egypt has pushed crude prices even higher, with no immediate resolution foreseen.

Still, the fund returned an annual average of 5.1% during the past five years, even though the recession torpedoed the stock market in 2008 and early 2009. The S&P 500 rose 2.1% in that time.

So why did Schoenstein purposely pass over the energy space?

"It's not so much that we purposely leave them out [of the portfolio]," Schoenstein says of energy companies. "It's not because we don't like the sector. They just don't qualify. The sector can't produce companies that actually meet our standards."

Based in Lake Oswego, Oregon with $3.7 billion in assets, the Jensen Portfolio isn't alone in this contrarian strategy. JPMorgan analysts recently urged caution in the energy industry, citing valuation concerns given the outperformance of many integrated-oil companies.

The Jensen Portfolio is instead betting on large-cap stalwarts. The five largest holdings are software giant Microsoft, investment firm T. Rowe Price (TROW - Get Report), medical-device maker Medtronic (MDT), consumer-goods company 3M and drink-and-snacks seller Pepsi.

Rather than chase performance, the Jensen Portfolio seeks out profitable businesses that provide attractive returns with less risk than the market. As part of the first step in the fund's investment process, Schoenstein and the other members of the investment committee focus in on companies that have a return on equity greater than 15% for each of the past 10 years.

Because of the ROE requirement, energy companies fail to make the grade. Schoenstein says there hasn't been any true consistency produced by any energy companies that they would qualify for the fund's discipline. Similarly, the fund doesn't invest in telecom services or utility companies.
1 of 5

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
ABT $45.41 -0.09%
MSFT $53.69 -1.03%
ORCL $39.26 -0.51%
PEP $100.50 -0.13%
TROW $76.01 0.52%


Chart of I:DJI
DOW 17,813.39 +1.20 0.01%
S&P 500 2,088.87 -0.27 -0.01%
NASDAQ 5,116.1430 +13.3350 0.26%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs