Billionaire Kenneth Fisher's, Fisher Asset Management updated its portfolio recently which reflected the fourth quarter changes. He added 33 new stocks to his portfolio which has taken the total value of his portfolio to ~$34.93 billion as on 31 Dec '12. Fisher adopts an investment strategy which focuses on knowing something about a stock which others do not. He generally starts with analyzing from a macro level to determine the key drivers for a stock. In today's article I will be discussing three stocks in which Fisher has increased its holdings by more than 300% as per the latest 13F filings. Let's discuss each of these stocks in detail.
% change from previous filings
BioMed Realty Trust (BMR)
Darling International (DAR)
Verizon Communications (VZ)
BioMed Realty Trust Inc. has always remained an attractive choice for the investors based on its dividend returns. The company has given an average dividend yield of ~5.5% in the last four years. I feel this is mainly because of its liquidity which is well positioned to support the higher returns for its shareholders. The company's significant leasing performance in the last one year also helped it in further improving its financial position. Currently, the forward annual dividend yield for BioMed is ~4.8%.
In the mid of 2012, BioMed made its first attempt into an international market with the acquisition of Granta Park Research Campus in Cambridge, UK. This ~$196 million acquisition was crucial for the company as U.K. is the largest life science market in Europe. It will further expand BioMed's association with some of its core tenants such as Pfizer and a subsidiary of AstaZeneca. The Granta Park is already fully leased to ~11 tenants with a remaining period of around eight years which provides a long-term earning capacity to BioMed. I expect the company to generate ~$15 million operating income annually from this acquisition.
BioMed's tenant base has now stabilized with its top 10 tenants representing around 50% of its annual rent. It includes some big names in the industry such as GlaxoSmithKline, Elan, Sanofi etc. I believe this strong portfolio of lease agreements would drive its earnings growth and the healthy balance sheet would support its above-average dividend yield.
Another pick from Ken Fisher's portfolio is Darling International which is a 130 years old company dealing in waste management. The company's recent performance was hit by lower pricing for the finished products for fats and proteins. However it was partially offset by improved higher volumes of raw materials. Going forward, the most significant catalyst for the company will be its Diamond Green Diesel project which is a joint venture with Valero Energy Corporation. Darling International will supply the feedstock for this project which would be converted into ~136 million gallons of renewable diesel annually. On the other hand, Valero Energy will control the operations and market the output of the project. The diesel facility is all set to begin its full line production in 2Q13 and is expected to drive the earnings for FY2013. I expect a ~$42 million of pre-tax earnings and a $0.22 increment to EPS for Darling International in 2013.
Darling International will also be benefited by its acquisition of all the assets of RVO BioPur LLC which was done last year. This acquisition would expand the company's presence in the New England area. It will also strengthen the company's portfolio with used cooking oil and grease trap services business from BioPur.
On the whole, the investors are excited about the beginning of the company's JV which provides a margin of safety for a long-term investment. Considering this I feel Darling International presents an impressive growth story which supports Fisher's interest in the stock.
Verizon Communications Inc. recently reported its 8-K filings which shows a record growth in its smartphones segment. It has activated ~9.8 million smartphones in the last 3 months period from Oct-Dec '12 as compared to ~7.7 million in the same period previous year. Among these, it activated 6 million iPhones which represents ~61% of the total, up from 56% last year. On the less positive side this will have a slight pressure on the EBITDA margins because of the incremental subsidy costs of the smartphones. However, I remain positive on this stock based on its solid extensive network and its strengths in the LTE footprint.
As the company now faces saturation in its mobiles as well as the wireline segments, it is venturing into new areas of growth. Its ~$612 million acquisition of Hughes Telematics in June '12 to delve into automotive technology market was one such example. The combination of Verizon's strong IP network and Hughes robust suite of applications will drive significant growth for the company. I feel the connected car opportunity is the most interesting thing to look forward for Verizon. This service will integrate your mobile phone or tablet to your car via cloud based technology. This application in the phone will allow its subscribers to locate your car, unlock it, check the fuel & engine status etc. I expect this to be a major theme in the wireless segment in 2013 as the major carriers are looking out for opportunity to deliver cloud based solutions.
The Investing Opportunity:
To sum up, all the three companies discussed above are well positioned in their respective industries. Ken Fisher's recent addition in these stocks is fairly justified based on their long-term fundamental growth. I feel these stocks have strong upside potential and they can be a good investment.