Top 6 Buys of Manning & Napier Advisors Inc.

|
Includes: CCL, CERN, ERIC, GIS, NSC, STT
by: Rash Menaria

Manning & Napier Advisors, Inc. is a 100% independent employee-owned investment advisory firm founded by William Manning in 1970. The firm manages ~ $25 bn in the Manning & Napier series of mutual funds in addition to other funds and caters to individuals and institutions.

Investment Strategy: Manning & Napier Advisors, Inc. primarily employs a bottom-up, fundamental approach in identifying domestic investments. The firm invests across all market-caps, seeking companies with strong strategic profile, such as strong market position, technological advantage, capital appreciation in a mature market, and high barriers to entry. In addition, target investments are companies with improving market share in consolidating industries and stocks with low price relative to fundamental or breakup value. For its international investments, Manning & Napier Advisors utilizes a top-down approach to evaluate economic trends and industry-specific factors to target opportunities that will benefit from these trends, such as those being created by global economic and political changes. The dividend focus strategy employs a fundamentally-based quantitative approach to identify high dividend-yielding stocks with high free cash flow and low likelihood of financial distress. The firm also manages sector-focused portfolios, including financial services, life sciences and technology.

The following is a list of Manning and Napier's top 6 buys by market value in the last quarter, as released in their most recent 13F filing with the SEC.

Stock

Symbol

Shares held

State Street Corp.

STT

6455640

Carnival Corporation

CCL

7148715

Norfolk Southern Corp.

NSC

4592928

General Mills inc.

GIS

8360385

LM Ericsson Telephone Co.

ERIC

14265217

Cerner Corp.

CERN

4388623

Click to enlarge

Here are some of the specifics about these companies, including a brief description of their business, growth rates (topline and bottomline) and Valuation:


State Street Corp.

Manning & Napier Advisors purchased 6286870 shares of State Street Corp. last quarter and now holds a total of 6455640 shares. This position is 1.39% of its portfolio.

State Street Corporation is a financial holding company. Through its subsidiaries, including its banking subsidiary, State Street Bank and Trust Company, provides products and services for institutional investors worldwide. It has two lines of business: Investment Servicing and Investment Management. Its EPS forecast for the current year is 3.75 and next year is 4.29. According to the consensus estimates, its top line is expected to grow 9.60% current year and 7.60% next year. It is trading at a forward P/E of 10.85. Out of 24 analysts covering the company, 19 are positive and have buy recommendations and 5 have hold ratings.

My Take: Buy. The company recently reported strong 4th quarter results, which-- according to Raymond James Analysts-- benefited from a multi-year rationalization of expenses and the repositioning of its securities portfolio. There is a good chance of PE expansion for the company as investors begin focusing on banks with attractive organic growth opportunities and positive leverage to rising interest rates.

Carnival Corporation

Manning & Napier Advisors purchased 5589555 shares of Carnival Corporation last quarter and now holds a total of 7148715 shares. This position is 1.32% of its portfolio.

Carnival Corporation is a cruise and vacation company. It has a portfolio of cruise brands and is a provider of cruises to vacation destinations. It has two cruise segments: North America, and Europe, Australia & Asia. Its EPS forecast for the current year is 2.66 and next year is 3.22. According to the consensus estimates, its top line is expected to grow 8.40% current year and 7.60% next year. It is trading at a forward P/E of 11.86. Out of 24 analysts covering the company, 20 are positive and have buy recommendations, 1 has a sell recommendation and 3 have hold ratings.

My Take:
Avoid. Rising Crude Oil prices and unrest in the Middle East affecting tourism in South Europe are the main concerns

Norfolk Southern Corp.

Manning & Napier Advisors purchased 2684533 shares of Norfolk Southern Corp.last quarter and now holds a total of 4592928 shares. This position is 1.53% of its portfolio.

Norfolk Southern Corporation (Norfolk Southern) is a Virginia based company that controls a railroad, Norfolk Southern Railway Company. Norfolk Southern Railway Company is primarily engaged in the rail transportation of raw materials, intermediate products, and finished goods primarily in the Southeast, East, and Midwest and, via interchange with rail carriers, to and from the rest of the United States. Its EPS forecast for the current year is 4.66 and next year is 5.37. According to the consensus estimates, its top line is expected to grow 12.40% current year and 10.20% next year. It is trading at a forward P/E of 12.73. Out of 32 analysts covering the company, 21 are positive and have buy recommendations, 2 have sell recommendations and 9 have hold ratings.

My Take: Buy. The company recently reported 1Q EPS of $1.00 which was well ahead of consensus $0.89. During the quarter, total volumes improved 8.1% year over year, and revenue per unit (RPU) increased 8.3% and is one of the strongest in the industry. Rising crude oil environment helps railroad carriers take market share from trucking industry as rail carriers are more fuel efficient. Norfolk Southern definitely is one of the best opportunities among railroads given its better than peer yield improvement.


General Mills Inc.

Manning & Napier Advisors purchased 5182844 shares of General Mills Inc. last quarter and now holds a total of 8360385 shares. This position is 1.47% of its portfolio.

General Mills, Inc. is a global manufacturer and marketer of consumer foods sold through retail stores. It is also a supplier of food products to the foodservice and commercial baking industries. General Mills manufactures its products in 15 countries and markets them in more than 100 countries. Its EPS forecast for the current year is 2.48 and next year is 2.68. According to the consensus estimates, its top line is expected to grow 0.90% current year and 3.80% next year. It is trading at a forward P/E of 14.37. Out of 20 analysts covering the company, 16 are positive and have buy recommendations and 4 have hold ratings.

My Take:
Buy. Recently Citi, Wells Fargo and Stifel Nicolaus released their research notes after meeting GIS Management. They are confident that GIS management remains comfortable in passing on increased raw material costs to retailers who are now more receptive to such price increases. General Mills is one of the best equipped in the food industry to confront and manage food inflation. The degree of price realization is picking up across its U.S. businesses and investors might take some comfort from it.

LM Ericsson Telephone Co.

Manning & Napier Advisors purchased 14120456 shares of LM Ericsson Telephone Co. last quarter and now holds a total of 14265217 shares. This position is 0.88% of its portfolio.

LM Ericsson (Ericsson) is a supplier of equipment, integrated solutions, multimedia applications and services to operators worldwide. It is a provider of communications networks, related services and multimedia solutions. It offers a portfolio of telecommunication and data communication systems, multimedia solutions and professional services, covering a range of technologies. It operates in five segments: Networks, Professional Services, Multimedia, Sony Ericsson and ST-Ericsson. Its EPS forecast for the current year is 0.85 and next year is 0.93. According to the consensus estimates, its top line is expected to grow 25.20% current year and 6.30% next year. It is trading at a forward P/E of 16.01. Out of 18 analysts covering the company, 3 are positive and have buy recommendations, 3 have sell recommendations and 12 have hold ratings.

My Take: Neutral. ERIC reported better than expected 1Q11 results driven by revenue increase from the core Networks business (+35% y/y) as component shortages that had held back shipments in earlier quarters eased. Although top line of Network business is expected to remain strong going forward, Gross Margins for the company might weaken as pricing environment is likely to worsen in 2H11 due to ramp-up of European Modernisation and India 3G rollout. Thus, I remain neutral on the stock.

Cerner Corp.

Manning & Napier Advisors purchased 1111442 shares of Cerner Corp. last quarter and now holds a total of 4388623 shares. This position is 2.34% of its portfolio.

Cerner Corporation is a supplier of healthcare information technology (HIT) solutions, healthcare devices and related services. Cerner solutions optimize processes for healthcare organizations. It operates in two segments: domestic and global. Its EPS forecast for the current year is 3.57 and next year is 4.28. According to the consensus estimates, its top line is expected to grow 12.70% current year and 12.50% next year. It is trading at a forward P/E of 26.15. Out of 23 analysts covering the company, 13 are positive and have buy recommendations, 2 have sell recommendations and 8 have hold ratings.

My Take: Neutral. The company recently reported strong results and bookings which imply significant market share gains in medium / large hospital space. Although Government EHR program is expected to be a significant tailwind for Cerner going forward, I remain neutral on the stock given its premium valuations.


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.