The New York-based investment firm Ruane, Cunniff & Goldfarb was founded by William J. Ruane and Richard T. Cunniff in 1969. Sequoia Fund has been managed by the firm, and it has one of the best performances on Wall Street. Since its inception, the fund returned 15% annualy. The firm's current chairman and CEO is Robert D. Goldfarb, and current president is David M. Poppe. The investment strategy is based on value investment for the long-term. The managers look at the earnings history, balance sheet, and prospects of investment when valuing a firm. Here, is a brief analysis of Ruane, Cunniff & Goldfarb's top 10 holdings.
Valeant Pharmaceuticals International, Inc. (VRX): Valeant Pharmaceuticals International Inc. develops, produces and markets products in the neurology, dermatology and branded generics areas. VRX has a market cap of $15.56 billion, and a forward P/E ratio of 15.45. The company doesn’t look so promising when looking at past EPS growth. However, expected EPS growth for the next five years is 25.57%. RBC Capital suggested an outperform rating for VRX, while UBS, Collins Stewart, Ladenburg Thalmann, Stifel Nicolaus (SF), Deutsche Bank (DB), and Jefferies& Co. (JEF) recommend buying. Ruane, Cunniff & Goldfarb is a long-term investor, so it is not surprising that they keep the VRX stocks for a long time. Given the recent takeover phenomena in pharmaceutical industry, it could join the trend as a take-over target.
The TJX Companies, Inc. (TJX): The Massachusetts-based TJX engages in marketing apparel and home fashions. The company was founded in 1956. With a market cap of $20.73 billion, TJX has a trailing ratio of 16.12, and a forward P/E ratio of 12.29. It also offers a dividend yield of 1.43%, while net profit margin is 6.1%. The company’s EPS growth in the last five years was 18.46%, while analysts expect an EPS growth of 13.70% in the next five years. Insider transactions had a 32.76% growth during the last six months. RBC Capital , Credit Suisse, and Cowen & Co (COWN) suggested outperform for TJX, while Deutsche Bank recommends buying. The insider transactions signal a strong buy.
Idexx Laboratories, Inc. (IDXX): Idexx Laboratories engages in developing, producing and marketing of products for the veterinary and animal markets. Maine-based company sells its products in the Americas, Europe and Pacific Asia. Its market cap is $4.60 billion, while P/E ratio is 32.91. The company has a forward P/E ratio of 26.96. IDXX had a 15.6% EPS growth in the last five years, and this year's EPS growth estimate is 17.77%. It has a net profit margin of 12.85%. Kaufman Bros and Piper Jaffray (PJC) recommend buying IDXX shares. Idexx is doing okay in terms of debt-to-assets, and the company hasn't had a major decrease since March 2009. IDXX can be considered in a high-growth stock portfolio.
Berkshire Hathaway Inc (BRK.A): The Nebraska-based Berkshire is an investment managing firm engaging in the insurance and reinsurance of property. Berkshire has a mega market cap of $202.67 billion. With a 9.87% net profit margin, BRK-A has a P/E ratio of 15.48, and a forward P/E of 16.66. The company had an annual EPS growth of 52.67%, whereas analysts estimate a 7.44% EPS growth in the next five years. Berkshire doesn’t have a dividend policy. If you believe in mean reversion, i.e. the future performance will depend on past history, Berkshire returned almost 20% annually since its establishment.
Fastenal Co. (FAST): The company engages in the wholesale of industrial and construction supplies. Owning a market cap of $9.77 billion, Fastenal has a 33.8 P/E ratio, and a 23.83 forward P/E ratio. Analysts expect the company to have a 18.78% EPS growth in the next five years, while its earnings increased by 44.48% this year. FAST offered a 1.55% dividend in 2010, and profit margin was 12.09%. Fastenal has a good current ratio of 5.41. Morgan Keegan and Robert W. Baird suggested an outperform rating for Fastenal, while UBS (UBS) and BB&T Capital (BBT) recommend buying. The company has no debts at all. ROA is 19.96%. SMA20, SMA50, and SMA200 ratios are 0.47%, 4.33%, and 18.14%, respectively. Fastenal is a company to buy on a correction.
Mohawk Industries Inc. (MHK): The Georgia-based Mohawk engages in the manufacturing and marketing of floor covering products, operating in three segments. With a market cap of $4.2 billion, MHK has a P/E ratio of 22.63, and forward P/E ratio is 15.58. The company had a gorgeous EPS growth of 3397.97% this year. Cowen & Co suggested an outperform rating for Mohawk, while UBS, Jefferies (JEF) and Sun Trust recommend buying. Its SMA20 and SMA50 ratios are 1.09% and 3.35%, respectively. The company does not have a dividend policy, while its debt-to-assets ratio strolls around 25%. The company is expected to have a 30.67% EPS growth next year, and P/S ratio is 0.79. Mohawk is another stock to watch for.
Precision Castparts Corp. (PCP): Precision Castparts, founded in 1949, produces and markets metal products internationally. With a large market cap of $22.17 billion, Precision Castparts has a trailing ratio of 22.72, and a forward P/E ratio of 18.16. PCP had a good EPS growth of 28.89% during the last five years, and its expected EPS growth for the next year is quite good: 20.71%. PCP has an eye-catching net profit margin of 16.06% with a dividend yield of 0.08%. Wedbush suggested outperform for PCP, while Stifel Nicolaus, C.K. Cooper, Broadpoing AmTech Research, Davenport and Soleil recommends buying. On the other hand, RBC Capital recommends PCP as a top pick. Its debt-to assets ratio is near to 0%. This company looks like a safe investment for the long-term.
Google Inc. (GOOG): Google supplies a variety of websites and other online content. Google’s market capital is $175.27 million. The company has a 19.95 trailing ratio, and a 13.74 forward P/E ratio. GOOG has past EPS growth of 39.28% in the last five years, whereas its expected EPS growth for the next five years decreases to 19.29%. Earnings increased by 28.89% this year. GOOG is worth to take attention with a net profit margin of 28.43%. Current ratio is 4.90. RBC Capital, Oppenheimer and Wedbush suggested outperform for GOOG, while UBS, Stifel Nicolaus, Deutsche Bank, Kaufman Bros, Canaccord Genuity, The Benchmark Company and Caris & Company recommend buying. While, stocks are little pricey, Google company looks promising, especially when its forward P/E ratio, its net profit margin and its long-term debt (No long-term debt for the last five quarters) are considered. Google doesn’t have a dividend policy, yet. If analyst estimates of 20% growth holds, Google can beat the market with a large margin.
Advance Auto Parts Inc. (AAP): Virginia based company manufactures products for automotive after-market, such as car accessories and batteries. It markets its products through its subsidiaries. Market cap of Advance Auto Parts is $5.17 billion. With a 5.84% net profit margin, AAP’s trailing ratio is 16.61, and forward P/E is 12.47. The company had a 39.77% annual EPS growth, whereas analysts estimate an annualized EPS growth of 11.43% in next five years. Earnings increased by 56.09% this quarter. Wedbush suggested outperform for AAP, while Morgan Joseph and UBS recommend buying. The company didn’t have a major downfall till Nov, 2008. AAP could be a good long-term stock to pick. Current prices are fair-valued.
Target Corp. (TGT): The Minnesota-based Target manages merchandise and food discount stores in the USA. With a market cap of $34.03 billion, TGT’s trailing ratio is 12.24, and forward P/E ratio is 10.56. Target Corp. offered a 2.04% yield last year. The company had a 8.13% EPS growth during the last five years, while earnings increased by 21.45% this year. Bernstein and Robert W. Baird suggested an outperform for TGT, while MKM Partners, UBS, Citigroup (C) and Jefferies& Co recommend buying. Analysts give a 1.90 to Target (1=Buy, 5=Sell). P/S and P/FCF ratios are 0.51 and 13.45, respectively. Barclays (BCS) has a target price of $60, and insiders have increased their holdings by 19% in last 6 months. Given the current price of $50, it has an upside potential of 20%.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.