Ravenel Boykin Curry IV manages New York-based Eagle Capital Management, which started as a family investment partnership and has grown to more than $5 billion in assets invested in equities. Curry has a long term-oriented investment approach and looks for out-of-favor companies that trade at a significant discount to intrinsic value. (Curry's firm is not to be confused with Meryl Witmer's Eagle Value Partners.)
The following are Curry's top 10 investment ideas, based on our proprietary MOI Signal Rank methodology. MOI Signal Rank answers the question, “What are this investor’s top 10 ideas right now?” Rather than simply presenting each investor’s largest holdings as of the recently filed quarter end, our proprietary methodology ranks the companies in a portfolio based on the investor’s current level of conviction, as judged by us. Our proprietary methodology takes into account a number of variables, including the size of a position in an investor’s portfolio, the size of a position relative to the market value of the corresponding company, the most recent quarterly change in the number of shares owned, and the change in the stock price of a position since the most recent quarterly filing date.
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MOI Signal RankTM - Top Ideas of Eagle Capital Management
Aon (AON) ($52 per share; MV $17 billion; EV $21 billion) is one of the largest insurance brokers and a leading human resource and consulting company. It expanded the latter capability with a $4.9 billion cash-and-stock merger with Hewitt Associates in late 2010 (Aon paid a 41% premium for Hewitt). The number of employees surged 63% from 36K at the end of 2009 to 59K at year-end 2010. The sell side expects Aon to earn $3.42 per share in 2011 (15x P/E), with $3.90 (13x) and $4.54 (11x) in the following years.
CEO Greg Case commented following the announcement of Q1 results:
We are firmly on track to deliver growth in both of our segments in 2011, our restructuring programs are delivering cost savings and we have solid financial flexibility. While macro conditions remain challenging globally, we are optimistic about the underlying strength of our business as highlighted by the repurchase of $350 million of common stock in the quarter.
Coca-Cola (KO) ($68 per share; MV $156 billion; EV $170 billion) is the world's largest non-alcoholic beverage company. It has been in business since 1886 and owns four of the world's top five non-alcoholic sparkling beverage brands, including Coca-Cola, Diet Coke, Fanta and Sprite. Of the 55 billion beverage servings of all types consumed worldwide every day, Coca-Cola-related beverages account for 1.7 billion servings. Unit cases sold through the Coca-Cola system increased 5% from 24 billion in 2009 to 26 billion in 2010, while revenue rose 13% during the same period. Analysts expect Coca-Cola to earn $3.86 per share in 2011 (18x P/E), with $4.28 (16x) and $4.71 (14x) in each of the next two years, respectively. The indicated dividend of $1.88 per share, an increase of 7% from a year ago, implies a yield of 2.8%. The company has boosted the dividend six times in the past seven years, with average annual dividend growth of 10% for the period. The company has a high-return business, with an average return on equity of 32% over the past seven years.
Comcast (CMCSA) ($26 per share; MV $70 billion; EV $109 billion) is a cable company that provides video, internet and phone services. In January, Comcast acquired content provider NBC Universal from GE. Comcast cable systems recently served 23 million video customers, 17 million high-speed internet customers and 9 million phone customers and passed over 51 million homes and businesses. Digital video customers increased 7% from 18.4 million at the end of 2009 to 19.7 million at yearend 2010. Analysts expect Comcast to earn $1.60 per share in 2011 (16x P/E), followed by $1.89 (14x) and $2.24 (11x) over the next two years. The company has upped the dividend three times in the past seven years.
Ecolab (ECL) ($57 per share; MV $13 billion; EV $14 billion) serves the hospitality, foodservice, healthcare and industrial markets with cleaning and sanitizing products as well as pest elimination services. Adjusted constant-currency EBIT increased 6% from $772 million in 2009 to $817 million in 2010, while revenue increased 3% in the period. Analysts expect Ecolab to earn $2.52 per share in 2011 (23x P/E), with $2.88 (20x) and $3.35 (17x) in each of the next two years, respectively. Ecolab has boosted the dividend six times in the past seven years, delivering an annualized growth rate of 11% during the period. Ecolab operates a high-return business, with an average return on equity of 23% over the past seven years.
Liberty Global (LBTYA) ($46 per share; MV $11 billion; EV $32 billion) is an international provider of video, broadband internet and telephony services, serving 18 million customers, primarily in Europe, Chile and Australia. It became the second-largest cable TV provider in Germany with the $2.8 billion acquisition of Unitymedia in 2010. The number of customers who receive at least one of the company's video, internet or voice services increased 6% from 16.6 million at the end of 2009 to 17.6 million at yearend 2010. The Street expects Liberty Global to earn $1.81 per share in 2011 (26x P/E), with $1.96 (24x) and $3.05 (15x) in the following years. Liberty chairman John Malone is known as an excellent capital allocator, which may be why Liberty Global trades at quite healty P/E multiples.
Microsoft (MSFT) ($26 per share; MV $219 billion; EV $181 billion) is the world's largest software maker, with unrivaled franchises in business software (Office suite) and operating systems (Windows) as well as strong positions in servers and tools (Windows, SQL), gaming (Xbox), and online services (Bing, MSN). Windows and Windows Live revenue rose 23% from $15 billion in the fiscal year ended June 30, 2009 to $18 billion in FY10, while total revenue increased 7% to $62.5 billion in the period. Analysts expect Microsoft to earn $2.58 per share in FY11 (10x P/E), with $2.77 (9x) and $2.99 (9x) in subsequent years. The dividend of $0.64 per share, an increase of 23% from a year ago, implies a yield of 2.5%. Microsoft has boosted the dividend five times in seven years, with a CAGR of 31% during the period. Microsoft operates a high-return business, with a seven-year average return on equity of 34%.
Newfield Exploration (NFX) ($69 per share; MV $9.3 billion; EV $12 billion), based in Houston, TX, is a U.S.-focused oil and gas E&P company, with two-thirds of proved reserves attributable to natural gas. The vast majority of the company's reserves are located in the U.S. Mid-Continent and the Rocky Mountains. The company's proved and probable reserves, stated in billions of cubic feet equivalents (using ratio of six Mcf of natural gas to one barrel of crude oil), rose 12% from 5,509 at the end of 2009 to 6,185 at yearend 2010. The Street expects Newfield Exploration to earn $4.89 per share in 2011 (14x P/E), followed by $6.20 (11x) and $7.13 (10x) in each of the next two years, respectively. Newfield has a $1.9 billion capex budget for 2011 and expects oil production to grow 50% during the year. Management's production guidance for 2011 remains 312-323 Bcfe, an increase of 8-12% over 2010 volumes. Details on Newfield's exploration and production plans are available in the company's recent investor presentation.
Praxair (PX) ($109 per share; MV $33 billion; EV $39 billion) was founded in 1907 and is the largest industrial gas supplier in North and South America, with an established presence in Europe and a growing presence in Asia. Praxair’s primary products are atmospheric gases (oxygen, nitrogen, argon, rare gases) and process gases (carbon dioxide, helium, hydrogen, electronic gases, specialty gases, acetylene). Capital expenditures increased 3% from $1.4 billion in 2009 to $1.4 billion in 2010, while revenue rose 13% during the period. The Street expects Praxair to earn $5.47 per share in 2011 (20x P/E), with $6.26 (17x) and $7.11 (15x) in each of the next two years, respectively. The company has raised the dividend six times in the last seven years, with average annual dividend growth of 22%. Praxair has a high-return business, with a seven-year average return on equity of 23%.
W.R. Berkley (WRB) ($33 per share; MV $4.6 billion; EV $5.7 billion), based in Greenwich, CT, operates in the property casualty insurance industry and is among the largest commercial lines writers in the U.S. Net premiums written increased 3% from $3.7 billion in 2009 to $3.9 billion in 2010, while revenue increased 7% in the period. The sell side expects W.R. Berkley to earn $2.42 per share in 2011 (14x P/E), with $2.61 (13x) and $2.70 (12x) in the following years. The company trades at 1.3x tangible book value of $3.7 billion. W.R. Berkley has boosted the dividend five times in the last seven years, delivering an annualized growth rate of 12%.
Wal-Mart (WMT) ($54 per share; MV $186 billion; EV $232 billion) is synonymous with discount retailing in the U.S. and increasingly also globally. The company operates in three segments: Wal-Mart U.S. (62% of fiscal 2011 sales), Sam's Club U.S. (12%), and Wal-Mart International (26%). Wal-Mart U.S. segment sales stayed roughly flat, going from $260 billion in the fiscal year ended January 31, 2010 to $260 billion in FY11, while total revenue increased 3% to $422 billion during the period. The Street expects Wal-Mart to earn $4.47 per share in FY12 (12x P/E), with $4.91 (11x) and $5.43 (10x) in subsequent years. The annual dividend of $1.46 per share, an increase of 21% from a year ago, implies a yield of 2.7%. Wal-Mart has boosted the dividend six times in the past seven years, delivering an annualized growth rate of 19% in the period. Wal-Mart has a high-return business, with an average return on equity of 21% over the past seven years.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.