Top Q2 Buys of Aberdeen Asset Management

 |  Includes: BSAC, EOG, LUKOY, PBR.A, PM, TS, VALE
by: Rash Menaria

Aberdeen Asset Management PLC is an investment advisory and hedge fund firm managing over $55 bn in equities. It employs a bottom-up, fundamental approach, investing in established companies that are attractively priced and have quality management teams and solid business models. The firm maintains a long-term focus in employing buy and hold strategies.

Following is a list of its top seven buys from its latest 13F filing.



Shares Held - 03/31/2011

Shares Held - 06/30/2011

Change in shares

Petroleo Brasileiro





Vale S.A.





EOG Resources, Inc.





Tenaris S.A.





Lukoil Oil Company





Banco Santander-Chile





Philip Morris International, Inc.





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My favourite stocks among the above list which I believe provides attractive risk reward are Vale S.A. and Philip Morris International Inc.

Vale S.A. is trading at 6.4x Dec’11 EPS and most of the analysts have buy ratings on the stock with median price target of $42.5 vs current price of 33.38. At these valuations, stock is already pricing in a lot of negatives and I don’t see any meaningful downside. On the upside, however, I see two major catalysts for the stock:

  1. Increase in dividends/share buybacks. The company has already surprised with dividends/buybacks ahead of expectations previously. With continued strength in iron ore prices, the company is generating strong operating cash flow and there is scope for further positive surprises.
  2. Successful completion of the Moatize coal project. Vale is very close to the completion of its Moatize project in Mozambique (expected for Oct’11), which is the first major coal project for the company. It is also one of the largest coal projects in the world (11Mtpy capacity in first stage). A successful on time completion will reflect company’s execution expertise and likely serve as a positive catalyst.

Philip Morris reported its results last week and positively surprised the street. Despite headwinds in Mexico, the EU, and EEMA, Philip Morris recorded slight volume gains on a Y-Y basis. PMI's cigarette shipment volume was 241.2 billion units, an increase of approximately 0.1% from last year. Asia remained the strongest market with 7.5% volume gains led by double-digit growth in Indonesia, Japan, and Korea. PM also realized higher prices in a number of markets that contributed to results. PM has an impressive geographic scale and boasts a strong brand portfolio, led by Marlboro. This combined with continued strength in the business makes it a good buy.

It is currently trading at 14x next year EPS and has a decent 3.5% dividend yield. Like fellow seeking alpha author Chris Santiago mentioned in his article, I believe it’s a good addition to dividend portfolio of the investors.

For other stocks, here are some of the specifics about their business and consensus price targets by sell side analysts.

Petroleo Brasileiro S.A. is a Brazilian integrated oil and gas company. The company operates in five segments: exploration and production; refining, transportation and marketing; distribution; gas and power, and international. It has a median sell-side price target of $45 compared to current market price of $30.

EOG Resources, Inc., together with its subsidiaries, explores, develops, produces and markets natural gas and crude oil primarily in producing basins in the United States, Canada, The Republic of Trinidad and Tobago (Trinidad), the United Kingdom, and The People's Republic of China. It has a median sell-side price target of $125 compared to current market price of $106.

Tenaris S.A. is a Luxembourg-based supplier of tubes and related services mainly for the energy industry and certain other industrial applications. The customers of the Company include oil and gas and engineering companies engaged in constructing oil and gas gathering, transportation and processing facilities. It has a median sell-side price target of $52.5 compared to current market price of $46.

Lukoil Oil Company is a Russia-based integrated oil and gas company. The Company is engaged in the business of oil exploration, production, refining, marketing and distribution. It has a median sell-side price target of $76.25 compared to current market price of $67.

Banco Santander Chile is a Chile-based financial services company. It provides a range of commercial and retail banking services to its customers, including Chilean peso and foreign currency denominated loans to finance a variety of commercial transactions, trade, foreign currency forward contracts and credit lines, and a variety of retail banking services, including mortgage financing. It has a median sell-side price target of $95 compared to current market price of $95.

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