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Similar Approach, Distinct Portfolios for Parnassus Funds

Connor Young

Connor Young: Silver-rated Parnassus Core Equity and Neutral-rated Parnassus Endeavor have much in common. The managers--Todd Ahlsten and Ben Allen for Parnassus Core Equity and Jerome Dodson and Billy Hwan for Parnassus Endeavor--seek firms with sustainable competitive advantages, relevant products, capable management, and ethical practices. Management buys with conviction and tends to hang on for the long term; indeed, both funds hold just 30 to 40 names and have below average portfolio turnover.

Despite the similar approach, the funds have distinct portfolios. Parnassus Core Equity has a clear quality tilt, which has helped protect against losses in down markets and dampen volatility. The fund has a Morningstar Risk rating of low. By contrast, Dodson and Hwan are less willing to pay up for quality in Parnassus Endeavor; they purchase only stocks trading at a one third discount to intrinsic value. They'll also build larger positions in high-conviction ideas. While holdings in Core Equity are capped at 5% of assets, Qualcomm and Gilead Sciences each comprised more than 10% of Endeavor's June 2018 portfolio. Dodson and Hwan's contrarian approach means Parnassus Endeavor can be an uneven ride; the fund has an above average Morningstar Risk rating.

Both funds receive positive process ratings, but greater conviction in Parnassus Core Equity's management earns it a higher Morningstar Analyst Rating.