Top Q2 Sells of Acadian Asset Management

Includes: C, CAH, CMCSA, IBM, JNJ, OSK, T
by: Rash Menaria
Acadian Asset Management LLC is an investment advisory firm catering to investment companies, pension and profit sharing plans, charitable organizations, corporations and government entities. It manages more than $49 billion in assets and covers both U.S. and foreign investments. The firm utilizes a team approach, screening a universe of companies across a global network on a daily basis and seeking those that are undervalued and exhibiting positive earnings trends and potential. Sell Criteria: 1) Expected return of a stock deteriorates; 2) A better opportunity arises. The following is a list of its top seven sells by market value in the last quarter, as released in the firm's most recent 13F filing with the SEC.
Shares Held - 03/31/2011
Shares Held - 06/31/2011
Citigroup, Inc.
Johnson & Johnson
International Business Machines
Cardinal Health, Inc.
Oshkosh Corporation
Comcast Corporation
AT&T, Inc.
My favourite sell (which still has unfavourable risk reward) from the above list is Oshkosh Corporation. Oshkosh Business fundamentals remain challenging given declining US defence spending. This trend is likely to continue for the next few years given the state of the US Budget deficit. Although Oshkosh has been in the news lately due to Carl Icahn’s acquisition of a 9.5% stake in the company and possible shareholder activism, I don’t think it would be an easy path. Oshkosh has integrated operations and important scale advantages (purchasing, product development), which could be impaired by spin offs. The sale of the company is equally unlikely as finding a buyer interested in all four business segments of Oshkosh seems difficult. The stock was trading at $25-$26 in mid June. It popped up to over $33.60 when Carl Icahn disclosed his stake. After that the stock has corrected to $30.54. I believe business fundamentals warrant a further correction.
One stock where I don’t agree with Acadian’s sell and believe it presents a good buying opportunity is Comcast Corporation. Comcast is trading at ~ 6.0x 2011E EV/EBITDA, which is at discount to its peers. Although 2Q is likely to be seasonally weak, I believe Comcast’s cable results will continue to lead the industry for the remainder of the year and there can be upside to 2011, and 2012, revenue/EBITDA estimates. Further, given Comcast’s strong cash flow profile, there is a good chance of substantially more share buyback in 2012, compared with 2011. I believe it’s a good time to buy Comcast given its attractive valuations, secular advantage in broadband, upside to consensus expectation and potential for a significant increase in shareholder returns in 2012.
For the other stocks, here are some of the basics about their business including sell side consensus price targets:
Citigroup Inc. is a global diversified financial services holding company. Citigroup businesses provide consumers, corporations, governments and institutions with a range of financial products and services. It has a median sell-side price target of $55 compared with the current market price of $39.91.
Johnson & Johnson is a holding company. The Company and its subsidiaries are engaged in the research and development, manufacture and sale of a range of products in the healthcare field. It has more than 250 operating companies conducting business worldwide. The Company’s operating companies are organized into three business segments: Consumer, Pharmaceutical and Medical Devices and Diagnostics. It has a median sell-side price target of $72 compared with the current market price of $66.25.
International Business Machines Corporation is an information technology company. It operates under five segments: Global Technology Services, Global Business Services, Software, Systems and Technology, and Global Financing. It has a median sell-side price target of $196 compared with the current market price of $183.70.
Cardinal Health, Inc. is a global healthcare solutions company providing products and services to hospitals, physician offices and pharmacies. During the fiscal year ended June 30, 2010 (fiscal 2010), the Company operated in two segments: Pharmaceutical and Medical. It has a median sell-side price target of $49 compared with the current market price of $45.39.
AT&T Inc. is a holding company. The Company is a provider of telecommunications services in the United States and worldwide. These include wireless communications, local exchange services, long-distance services, data/broadband and Internet services, video services, managed networking, wholesale services and directory advertising and publishing. It has a median sell-side price target of $32.50 compared with the current market price of $29.91.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.