By Matt Doiron
Many major investors are required to file 13Fs with the SEC within six to seven weeks after the end of each quarter, disclosing many of their long equity positions as of the end of the quarter. Billionaire Ken Fisher's Fisher Asset Management has turned in its homework early, already filing its 13F for the end of March. While investors should not blindly imitate 13F filings, we think that they can be a good source of initial ideas, which can be researched further if the companies do in fact look to be good values. Read on for our quick take on Fisher's five largest single-stock holdings by market value as of the end of March, see the full 13F from the SEC website, or compare his picks to those in previous filings.
The fund sold a small portion of its shares of Pfizer (PFE) but the drug manufacturer was still the top stock pick by market value. Fisher had named Pfizer his pick for 2013 in his column for Forbes magazine. The stock trades at 15 times trailing earnings, a level it's reached in part by generating a strong market return over the last year. Wall Street analyst consensus for 2014 implies a forward P/E of 12, and if the company hits that target very little growth would be required to make it a value stock. As might be expected for a mega-cap healthcare company, Pfizer pays a dividend yield above 3%.
Fisher reported a position of a little over 10 million shares of Johnson & Johnson (JNJ) as of the beginning of April. Johnson & Johnson's dividend yield is a bit lower than Pfizer's, at 3%, but the personal products company is significantly less exposed to the broader economy with a beta of 0.5. Revenue grew 8% in the fourth quarter of 2012 versus a year earlier, stimulating even higher earnings growth, though the stock already has quite a bit of improvement on the bottom line priced in with a trailing earnings multiple of 21. It's probably best to wait for another quarter or two of results.
American Express (AXP) was another of Fisher's top stock picks with the filing disclosing ownership of almost 11 million shares- up from about 9 million at the end of December. The credit and travel services company experienced a sharp decline in net income in its most recent quarter compared to the same period in the previous year; while revenue was up slightly, this is quite concerning and we'd have to be satisfied that the business is in good shape before considering a purchase. American Express carries trailing and forward P/Es of 17 and 12, respectively, as analysts expect it to recover.
According to the 13F Fisher had about 30 million shares of General Electric (GE) in its portfolio at the end of Q4 2012. GE experienced moderate growth rates on both top and bottom lines in its last quarterly report compared to the fourth quarter of 2011, though again the stock's earnings multiples suggest that investors already expect high growth. Specifically, the trailing P/E is 18 - a level at which the recent earnings growth figures would have to be sustained for several years in order to make the stock a good value. We'd note that GE pays a 3.3% dividend yield, even with Pfizer's.
Fisher slightly cut his stake in Wells Fargo (WFC) between January and March but the bank was still one of his top five stock positions. Wells Fargo is also well known as one of Warren Buffett's favorite stocks; his Berkshire Hathaway owned almost 440 million shares at the end of December, per the holding company's most recent 13F filing (find Buffett's favorite stocks). The large bank does trade at a premium to the book value of its equity, with a P/B ratio of 1.3, but Wells Fargo's effectiveness in wringing income from its assets results in earnings multiples in the 10-11 range, competitive with other megabanks.