By Nico Gayle, Guest Editor
We did some research on 'Magic Formula' Guru Joel Greenblatt’s top 20 holdings of stocks with market caps over $10 billion. The list appears heavy on tech and interestingly, tobacco and pharmaceutical companies. Here is the full list:
SanDisk (SNDK): SanDisk is a leading producer of flash memory card products. Shares are currently trading at an 8.03 P/E multiple. The company has a temporary shutdown of a Japanese production plant in place, but says that it is otherwise unaffected by the disaster in Japan.
McGraw Hill Companies (MHP): McGraw Hill provides information services for financial, educational, and business information markets, and is the parent company of Standard & Poor’s. The stock is trading at a P/E of 13.97. The firm just bought Bookette Software, a provider of automated scoring for tests.
Lorillard Inc. (NYSE:LO): Cigarette company Lorillard is trading at a P/E of 11.54, and the stock also pays a hefty dividend of $5.20 (6.60%). U.S. government advisors recently released a report saying that teen use of menthol cigarettes is rising. Lorillard’s Newport brand is the leading menthol-flavored brand, and accounts for about 90% of its revenues. However, the FDA is now reported to be weighing a ban on menthol cigarettes.
Microsoft (NASDAQ:MSFT): The software and tech giant is currently trading at a 10.84 P/E ratio. The firm just released Internet Explorer 9, but appears to be pulling the plug on the Zune music player. David Einhorn is also a shareholder, as we wrote about here.
Raytheon (NYSE:RTN): Raytheon is a major diversified aerospace and defense company with a market cap of $18.36B. It is trading at a P/E of 10.63 and offering a 2.90% dividend. Despite many people’s worries about the U.S. defense budget, Raytheon has high insider ownership and has teamed up with the military on several recent projects.
Reynolds American (NYSE:RAI): The maker of several cigarette brands, including Camel and Winston, Reynolds has a market cap of $19.28 and offers a $2.12 (6.30%) dividend. In late February, Reynolds, along with Lorillard (LO), sued the FDA for having biased members on the advisory committee that will decide the fate of menthol cigarettes.
Dell (NASDAQ:DELL): Computer-maker Dell has a market cap of $28.28B, and is trading at a P/E multiple of 10.89. The company appears set to release a tablet PC with three other tech companies. Lee Ainslie is also a shareholder, as we wrote about here.
Accenture (NYSE:ACN): Accenture is a management consulting, technology consulting, and technology outsourcing firm with operations around the world. It has a market cap of $32.04B, and is currently at a 17.90 P/E ratio. The firm recently won a contract with Israel’s monopoly power supplier, Israel Electric Corporation.
Research in Motion (RIMM): Maker of the popular Blackberry cell phone, the company has a market cap of $31.72B and is trading at a P/E of 10.50. The firm’s new tablet PC, the PlayBook, could have a big impact on its competitiveness with rivals Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG).
AstraZeneca (NYSE:AZN): The large pharmaceutical company, with a market cap of $65.09B, is currently trading at a P/E of 8.15. The company could benefit from radiation treatment in Japan through Ethyol, a prescription drug by MedImmune, which is owned by AZN. On the other hand, the company recently agreed to pay $68.5 million in a settlement with the government over alleged improper marketing of its drug Seroquel. We also think AZN is one of five high yield healthcare stocks that Buffett might buy.
Nokia (NYSE:NOK): Nokia, maker of mobile phones and other devices, has a market cap of $29.90B and is trading at an 11.68 P/E ratio. In 2010, the firm was second in smartphone revenue market share, with 20% of the value share. Nokia also has entered into an important partnership with Microsoft (MSFT) to use the Windows Phone 7 software on future Nokia smartphones.
GlaxoSmithKline (NYSE:GSK): The pharmaceutical giant is currently trading at a 35.47 P/E ratio, and offers a $2.46 (6.40%) dividend. After 18 years in a partnership with Human Genome Sciences (HGSI), GSK finally has its first reward after the FDA approved a new lupus treatment discovered by the group. The group has several treatments for other conditions still in testing.
Altria Group (NYSE:MO): As we wrote about here, Altria, which produces and sells popular tobacco products such as Marlboro and Parliament cigarettes, Copenhagen and Skoal smokeless tobacco, and more, offers a 6.10% dividend yield and has a market cap of just over $50B. The company has an impressive 84% ROE over the last 12 months, and, despite being a tobacco company, recently ranked 35th on a list of the 100 Best Corporate Citizens by Corporate Responsibility magazine.
AmerisourceBergan (NYSE:ABC): A pharmaceutical services company, ABC has a market cap of $10.03B. In recent news, CEO David Yost announced that he will retire on July 1, and will be replaced by current COO Steven Collis.
Bristol-Myers Squibb (NYSE:BMY): Yet another pharmaceutical company in Greenblatt’s portfolio, BMY has a market cap of $42.51B, and has a dividend yield of 5.00%. A new BMY drug, Ipilimumab, intended to treat melanoma and other tumors, is up for FDA marketing approval later this month. We think this is a great drug stock to consider for your golden years. Many people consider the drug as BMY’s most important developmental product. If approved, it would be a significant breakthrough as the first melanoma drug approved in 13 years. Experts are optimistic that it will receive approval.
Viacom (NYSE:VIA): Entertainment company Viacom has a market cap of $29.54B. On March 7, the CEO said that he sees a possibility of increasing the company’s dividend, currently yielding 1.20%, on July 1, and hopefully every year moving forward.
Mastercard (NYSE:MA): The credit card company has a market cap of $31.90B. MA has announced that it will waive processing fees on any American donations to a number of relief organizations for Japan. If you’re looking for some other ideas in the credit card space, we actually like American Express (NYSE:AXP), as we wrote about here.
McKesson (NYSE:MCK): Guru investor Lee Ainslie is also a shareholder, as we wrote about here. With a market cap of $19.23B, McKesson distributes drugs, and offers supplies and information management products for the healthcare industry. A Boston federal court recently approved a class action lawsuit against McKesson on behalf of several municipalities over claims of overcharging for drugs.
Hewlett-Packard (NYSE:HPQ): As we wrote about here, this computer and technology company has a market cap of $86.86B. The company recently unveiled its expansion strategy, with the CEO saying that it will build out its software business and expand into cloud computing.
Western Union (NYSE:WU): Western Union, which provides money transfer and payment services worldwide, has a market cap of $13.21B. On March 9, shortly before the tsunami in Japan, WU announced that it would launch money-transfer service to Japan this summer via Seven Bank.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.