Analyzing Goldman's Top Sells

by: Rash Menaria

Goldman Sachs Group (NYSE:GS) manages over $100 bn in equities primarily through its asset management subsidiary Goldman Sachs Asset Management. The firm manages the Goldman Sachs series of funds apart from other series of mutual funds and caters to individuals and institutions. The following is a list of its top 15 sells (market value wise) in the last quarter, according to its 13F filing with the SEC.



Shares Held - 12/31/2010

Shares Held - 03/31/2011

Baxter International Inc




Motorola Solutions Inc




Apple Inc




Cisco Systems Inc




CVR Energy Inc




Occidental Petroleum Corporation




Range Resources Corporation




Broadcom Corp




Biogen Idec Inc




Weatherford International Ltd




CBS Corp Cl B




MasterCard Incorporated




Archer Daniels Midland Company




Bank Of America Corporation




Equity Residential




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Here is my take on Goldman’s top five sells:

Baxter International Inc, through its subsidiaries, develops, manufactures and markets products that save and sustain the lives of people with hemophilia, immune disorders, infectious diseases, kidney disease, trauma, and other chronic and acute medical conditions.

My Take: Buy

Baxter reported net income in the first quarter of $570 million and earnings per diluted share of $0.98, which exceed the company's previously issued earnings guidance of $0.92 to $0.94 per diluted share. On an adjusted basis, excluding special items in the first quarter of 2010, Baxter's earnings per diluted share increased 5 percent from $0.93 per diluted share in the prior-year period. Worldwide sales totaled $3.3 billion and increased 12 percent compared with sales of $2.9 billion in the first quarter of 2010. For full-year 2011, Baxter now expects to achieve sales growth, excluding the impact of foreign currency, of 3 percent to 4 percent, and earnings per diluted share, before special items, of $4.20 to $4.28 per diluted share.

The acquisition of Talceris by Grifols will create a number three competitor in the global plasma proteins market. With the merger, there is expected to be a better pricing environment in the plasma proteins market. This will bode well for Baxter, which is the number one producer.

Motorola Solution Inc, a manufacturer of two-way radios, wireless network security products, and voice and data communications systems.

My Take: Buy

MSI’s first quarter earnings results showed that net sales grew 8 percent from first-quarter 2010, to $1.9 billion. Government sales increased to $1.2 billion, up 5 percent from first-quarter 2010. Enterprise sales increased to 14 percent from first-quarter 2010, to $695 million. During the first quarter of 2011, Motorola Solutions generated $231 million of cash from operations compared with $59 million in the year-ago quarter. Motorola Solutions expects its revenue to grow by 4 percent - 4.5 percent year over year. Motorola Solutions commands nearly half of the total public safety market in the U.S. The company is the largest manufacturer of barcode readers and small rugged mobile computers.

Motorola is shifting its focus toward international operations, to increase its market share, as the competition in North America remains particularly difficult. The company is also expanding relationships with other wireless carriers in an attempt to reduce dependence on Verizon (NYSE:VZ).

Apple Inc, together with subsidiaries, designs, manufactures, and markets personal computers, mobile communication and media devices, and portable digital music players, as well as sells related software, services, peripherals, networking solutions, and third-party digital content and applications worldwide.

My Take: Buy

Both Apple and the smartphone market have seen accelerating growth in the past two quarters, while Research In Motion (RIMM) has lagged the market, with a significant downturn in Q2. With disappointing first quarter earnings form Nokia (NYSE:NOK) and Research in Motion (BlackBerry manufacturers) there is a strong possibility for further opportunities for the iPhone to gain market share. The ramp up of the mobile Internet has driven increased innovation in the smartphone market.

Apple’s settlement with Nokia may set up for a more aggressive bid for Nortel’s patents. Apple has loads of patents in PC and user-interface technologies, but in mobile telephony it's relatively young compared with companies like Nokia and Nortel. A successful bid will help it to increase its lead in the smartphone market.

Cisco Systems is a provider of data networking products using Internet protocol technology. The Company's solutions transport data, voice, and video within buildings, across campuses, and around the world. Product offerings fall into several categories: Routing, Switching, Advanced Technologies, Services and Other Products.

My Take: Hold

Net sales increased 5 percent with net product sales increasing 3 percent while service revenue increased 14 percent, year on year (third quarter). Product sales represented 80 percent of total revenue while service revenue represented 20 percent of total revenue. Total gross margin declined by 2.6 percent year on year primarily as a result of higher sales discounts, unfavorable product pricing, and unfavorable product mix. The consumer business declined by 49 percent in the third quarter of 2011, versus the same period last year. The public sector business also declined 8 percent. On the other hand enterprise, service provider and commercial grew by 12 percent, 3 percent and 14 percent respectively.

On one hand cost initiatives could improve margins and in some quarters mix will accommodate. With that said, competition isn't standing still and could add to pressures. Cisco has hard decisions balancing share and margins. Budget cuts in the U.S. and globally continue to pressure Public Sector sales, which carry better-than-average margins for Cisco. Intense competition in the Data Center space from low-cost competitors like HP (NYSE:HPQ)drive faster-than -anticipated share loss.

CVR Energy is an independent petroleum refiner and marketer of high value transportation fuels in the Midcontinent (Mid-Con) United States. In addition, CVR Energy subsidiaries own a majority interest in and serve as the general partner of CVR Partners, LP, a producer of ammonia and urea ammonium nitrate, or UAN, fertilizers. The headquarters are in Sugar Land, Texas, with main operations in Coffeyville, Kansas.

My Take: Buy

CVI reported first quarter 2011 net income of $45.8 million, or 52 cents per fully diluted share, on net sales of $1,167.3 million. In the first quarter 2010, the company reported a net loss of $12.4 million, or a loss of 14 cents per fully diluted share, on net sales of $894.5 million.

The petroleum business reported first quarter 2011 operating income of $105.7 million, and adjusted EBITDA of $91.7 million, on net sales of $1,111.3 million, compared with an operating loss in the same quarter a year earlier of $7.1 million, and a negative adjusted EBITDA of $4.4 million, on net sales of $856.7 million.

The nitrogen fertilizer operations reported first quarter 2011 operating income of $16.8 million, and adjusted EBITDA of $25.9 million, on net sales of $57.4 million, compared with operating income of $3.0 million, and adjusted EBITDA of $8.8 million, on net sales of $38.3 million during the equivalent period in 2010.

CVI has benefitted from higher refining margins, rising crude oil prices and increased throughput and product sales volumes. WTI (Western Texas Intermediary) discounts continue to drive strong earnings for mid-con refiners. The ongoing crude oil supply constraints in international light crude markets, driven by the Libyan crisis and continued emerging market growth, has brought the WTI/Brent differential back to its early 2011 highs. The WTI/Brent differential currently stands at over $20/bbl. With an already discounted crude price, in comparison with the marginal coastal refiner, inland refineries have experienced an extended period of near-record level earnings.

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