by Siraj Sarwar
Tweedy, Browne is one of the largest fund managers in the market. It offers a unique value strategy that looks for long-lasting growth of capital by investing in mostly high-dividend corporations. Tweedy, Browne goes after the stocks that have low valuations as compared to other companies in the same industry.
At the end of Q3, Tweedy, Browne purchased 2 new stocks, increased its holding in 3, and sold 2 out. Tweedy, Browne's big buys for the latest quarter include: Emerson Electric Co. (NYSE:EMR), Connecticut Water Service (NASDAQ:CTWS), Bank of New York Mellon (NYSE:BK), ConocoPhillips (NYSE:COP), Fisher Communications (FSCI).
% of Portfolio
Change in Shares
Emerson Electric Co
Connecticut Water Service
Bank of New York Mellon
Emerson Electric Co
Emerson operates in five business segments: industrial automation, process management, climate technologies, network power, and tools and storage. Emerson Electric offers investors a wide portfolio of industrial businesses and a track record for providing constant returns to investors. I like Emerson's prospects in spite of the challenging competitive environment.
Emerson documented better-than-expected earnings as the corporation benefited from expansion of margins and sales growth. Emerson earned $1.11 per share for Q4, up 7% from the same period previous year. Management also increased its quarterly cash dividend to $0.41 per share from 0.40. For financial 2013, Emerson is expecting earnings of $3.63 per share on annual revenue of $25.21 billion, as reported here.
Tweedy, Browne further increased its stake in Emerson from 3.39% of the portfolio to 3.83% in the recent quarter. The stock at present is the hedge fund's number 10. The latest sell of a major amount happened in Q3 of the previous year, when Tweedy, Browne sold 0.27 million shares. Apart from this, Emerson has been a constant favorite of Tweedy, Browne since the third quarter of 2010.
Connecticut Water Service
Connecticut Water Service, through its subsidiaries functions as a regulated water corporation in Connecticut. It performs through three segments: Real Estate Transactions, Water Activities, and Services and Rentals. This dividend champion raised quarterly distributions by 2.10% to 24.25 cents/share. This marked the 43rd consecutive annual dividend increase for the company.
Connecticut water service is a dependable, steady corporation that weathers economic conditions pretty well and pays a great dividend. Connecticut Water Service is one of those names you can rely on. It is really not glamorous, but it is financially solid with dependable dividends that have averaged 3.6 percent over the previous five years.
Management has executed an excellent job keeping costs down and using revenue smartly. The company only takes $3.62 to make a dollar in sales (price-to-sales ratio). It also does a great job organizing itself with low debt. The corporation is financially strong enough to fulfill its interest payments much better compared to other names in the market. The hedge fund bought 6483 new shares of Connecticut water service in the latest quarter. This constituted 0.01% of Tweedy, Browne's total portfolio. It was the first time that the corporation had appeared inTweedy, Browne's 13F filing.
Bank of New York Mellon
Bank of New York Mellon was built by the July 2007 merger of Bank of New York and Mellon Financial. The resulting company is one of the globe's largest financial services corporations. Bank of New York Mellon offers a wide range of services to governments, investors, and corporations. The majority of the bank's profits are derived from two business segments: issuer services and asset servicing (global custody). I like the bank's competitive position and its long lasting growth prospects in the two segments.
Tweedy, Browne further increased its stake in Bank of New York Mellon from 3.45% of the portfolio to 4.11 in the recent quarter. The stock is currently the fund manager's number 8. The latest sale of a significant amount happened in the Q1 of the current year when Tweedy, Browne sold 0.1 million shares. Apart from this, Bank of New York Mellon has been a constant favorite of Tweedy, Browne since the second quarter of 2010.
ConocoPhillips is a U.S.-based independent E&P. In 2011, it generated 867,000 barrels per day of oil and natural gas liquids. In addition, the company produced 4.5 billion cubic feet a day of natural gas, mainly from the United States, Norway, Canada, and the U.K. Verified reserves at the end of 2011 were standing at 8.4 billion barrels of oil equivalent, 41 percent of which are natural gas. Over the previous three years, the corporation has displayed extraordinary growth in its earnings. ConocoPhillips net income stand at $4.4 billion, which increased to $12.4 billion at the end of 2011. In addition, the corporation has outstanding cash flows. By the end of 2011, ConocoPhillips produced over $6 billion in free cash flows. The company has a dividend yield of 4.75 percent, and yearly dividend of $2.64.
Tweedy, Browne increased its stake in ConocoPhillips by 1% in the most recent quarter, bringing the total to 29.27 million shares. The stock is currently the hedge fund's number 3. The company constituted 6.30% of the hedge fund's total portfolio. ConocoPhillips made considerable acquisitions over the last decade to improve reserves and raise production. The ensuing drop in commodity prices made those purchases appear poorly timed, however. Consequently, management changed course in previous years by reducing investment and selling assets. In May, the company took the final action by spinning off the downstream assets into an individual company, Phillips 66 PSX. Now ConocoPhillips is concentrating on growth.
Fisher Communications is a Seattle-based communications and media company. Fisher Communications engaged primarily in television and radio broadcasting operations, television programming development, production, and satellite teleport operations. Its nine network-affiliated television stations are located in the Northwest. In addition, Fisher Communications has 27 radio stations that broadcast in Washington, Oregon, and Montana.
The hedge fund bought 6483 new shares of Connecticut water service in the latest quarter. This constituted 0.01% of Tweedy, Browne total portfolio. It was the first time that the corporation had appeared in the 13F filing of Tweedy, Browne. Fisher Communications is a small cap company from services sector with low valuations. The service sector has been among the top performing of recent years.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: EfsInvestment is a team of analysts. This article was written by Siraj Sarwar. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article