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By Premo Sewnunan

Today we take a look at a lesser-known investment guru, Bill Nygren, to see what stocks he's been purchasing recently. As always, use the list below as a starting point for your own due diligence.

Unilever (UL): This stock makes up 0.91% of the portfolio. During the fourth quarter of 2010, he bought 950,000 shares at an average price of $29.69. In the first quarter of 2011, a further 1.15 million was bought at an average price of $29.77.

While the common stock is currently trading near its 52-week high of $34.55, its price-to-earnings and price-to-book ratios are at 10-year lows. On the valuation front, comparing Unilever against Procter & Gamble (PG):

P/E

price-to-book

Price to Cash Flow

Dividend Yield (%)

UL

15.6

4.37

19.1

4.68

PG

15.7

2.57

11.8

3.44

Emerging markets are a key earnings driver for Unilever, accounting for 55% of total revenues. In contrast, the North American and Western European regions were disappointing, with declines in underlying sales. Margins will likely be affected due to commodity inflation.

Unilever will be able to counter with price hikes. So far, the increases haven’t been enough to offset the higher operating costs. The purchase of Alberto Cluver (ACV) enhances Unilever’s hair care range, and should realize additional sales of $1.6 billion going forward.

With the dividend recently been raised by 15%, this high-quality stock should appeal in income investors.

Northrop Grumman (NOC): Northrop Grumman makes up 0.62% of the portfolio. As with Unilever, 2 blocks of shares were bought in consecutive quarters. In the third quarter of 2010, 860,000 shares were bought at an average price of $57.44. In the first quarter of 2011, a further 380 000 shares were added with an average price of $ 67.82.

The stock is currently trading just above its 52 week low, on a historical basis, its price-to-earnings and price-to-book ratios sit at 10-year lows. Against its peers, Boeing (BA), General Dynamics (GD) and Lockheed Martin (LMT), Northrop compares favorably.

P/E

price-to-book

Price to Cash Flow

Dividend Yield (%)

NOC

7.7

1.13

5.4

4.06

BA

12.17

9

8.2

2.92

GD

8.19

1.49

6.4

3.27

LMT

8.69

7.08

6.6

4.32

The company recently sold off its shipbuilding business, allowing it concentrate on its core business of defense projects. Near term prospects look promising, in addition to strong demand for its unmanned systems and cyber security offerings, the company is a major subcontractor to the F18 and F35 fighter jet program, which have substantial orders.

A major hurdle looms though. Ninety percent of the company’s revenues are derived from the U.S government. With budget cuts, military spending will be reduced. It’s not clear which programs will be cut or reduced, therefore current and future investors must monitor proceedings from Capitol Hill.

AFLAC Inc (AFL): This stock makes up 1.27% of the portfolio. In third quarter 2010, 800,000 shares were bought, at an average price of $ 49.20. In first quarter, 2011, a further 400,000 was added with an average price of $56.10.

As with its peers, American Independence Corp (AMIC), CNO Financial Group (CNO) and Delphi Financial Group (DFG), the stock currently trades just above its 52 week low. The price-to-earnings and price-to-book ratios sit at 10-year lows as well.

P/E

price-to-book

Price to Cash Flow

Dividend Yield (%)

AFLAC

9.1

1.35

6.7

4.68

AMIC

19.8

0.47

11.2

0

CNO

5.2

0.32

1.8

0

DFG

6.1

0.7

NA

2.22

Analysts expect Aflac’s revenues to rise between 8% to 10% this year due to strong demand on its Japanese insurance arm. The company recently reaffirmed third-quarter earnings guidance in line with analysts’ expectations.

With most of Aflac’s business is in Japan, the stronger yen is helping Aflac’s financial results. The company reduced its investment risks, with exposure to banks and other financial entities down to 33% of investments.

Also encouraging was positive US sales growth in the first quarter, the first increase in nine quarters. The fundamentals of its Japan business are strong, the business should benefit from improved margins and strong premium growth. Aflac maintains a strong capital position and generates consistent earnings which should allow it to increase its dividend and repurchase stock. Indeed, the company has increased its annual dividend for 28 consecutive years.The current market conditions pose a good entry point for this stock.

FedEx Corporation (FDX): Currently this stock accounts for 1.43% of the portfolio. After selling sizable amounts in the last two quarters of 2009 and first quarter in 2010, Bill bought 70,000 shares at an average price of $89.87 in the fourth quarter of 2010. A further 200,000 shares were added in the first quarter of 2011 at an average price of $91.98.

As with its peer United Parcel Service (UPS), the stock currently trades just above its 52-week low. On the valuation metric side, the price-to-earnings ratio sits at a 10-year low while price-to-book is just above its 10-year low.

P/E

price-to-book

Price to Cash Flow

Dividend Yield (%)

FDX

16.01

1.52

6.8

0.71

UPS

15.02

7.33

10.4

3.37

FedEx is going from strength to strength in all its business segments. Full year results showed double digit increases in revenues, net income and earnings per share. Its loss making arm, FedEx Freight also returned to profitability.

Management is cautiously optimistic about fiscal 2012, raising earnings per share guidance on its first quarter and full year results. Potential risks remain though, the current state of the global economy or higher oil prices could put a damper on results.

Merck & Co. Inc (MRK): This stock makes up 1.86% of his portfolio. In the first quarter of 2011, 500,000 shares were added at an average price of $33.46.

The stock is currently trading a little above its 52-week low. Price-to-book ratio is at a 10-year low. In the valuation stakes, judging Merck against Pfizer (PFE), Bayer (OTCPK:BAYRY) and GlaxoSmithKline (GSK):

P/E

price-to-book

Price to Cash Flow

Dividend Yield (%)

MRK

22.6

1.74

8.1

4.86

PFE

16.5

1.56

8

4.53

BAYRY

23.3

1.87

8.9

3.61

GSK

19.7

7.3

12.3

5.32

The company reported strong June quarter results. Earnings per share rose 10%, due to solid growth in the pharmaceutical segment, where key products experienced high single and double-digit growth. On the world wide front, sales increased 7.7% due to strong sales of its top selling product, Singular, which rose 8% and its diabetes franchise, Januvia and Janumet rising 35%

A solid dividend yield of 4.9% is worth noting. Although management has a long history of returning cash to shareholders, rising R&D costs could damper dividend growth. Looking to 2014-2016, the stock lacks significant price appreciation due to patent expirations and high R&D spending. On the other hand, new pipeline projects and strong fundamentals are encouraging.

JPMorgan Chase (JPM): Currently, the composition of this stock in Bill’s portfolio is not known. In the first quarter of 2011, 200,000 shares was bought at an average price of $45.41. Currently 500,000 shares are held within the portfolio.

Along with its peers, Bank of America (BAC), Barclays (BCS) and Citigroup (C), the common stock is just above its 52-week low. Price-to-earnings and price-to-book ratios are at 10-year lows as well.

P/E

price-to-book

Price to Cash Flow

Dividend Yield (%)

JPM

7.3

0.77

5.4

2.91

BAC

N/A

0.79

0.34

0.57

BCS

7.3

0.36

3.90

3.6

C

8.1

0.44

5.9

0.15

The strong June quarter results reflected solid performance across most of its business segments. However, the outlook for the near term appears challenging. It’s anyone’s guess whether revenue from investment banking will remain as strong as the first half of 2011. Due to new regulations, management expects debit card revenue to fall by $1 billion by the December quarter.

Exposure to the troubled European nations is about $15 billion. A worst case scenario could see losses amounting to about $3 billion. On a positive note, JPMorgan has decent positions in the credit card and investment businesses. Healthy capital purchases will likely result in share buy-backs and dividend increases.

Source: Guru Investor Bill Nygren's 6 Big Buys