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. (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 (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 (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 (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 (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 (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 (AAPL) and Google (GOOG).
AstraZeneca (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 (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 (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 (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 (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 (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 (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 (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 (AXP), as we wrote about here.
McKesson (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 (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 (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.