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Wellington Management Company is an investment advisory and hedge fund firm managing over $300 billion in equity assets. The firm manages the Hartford series of funds in addition to other funds. WMC caters to individuals, institutions and pension and profit-sharing plans, charitable organizations, banking and corporations.

I discussed the Top 7 Buys of Wellington in a previous article. In addition to buys, it is also interesting to have a look at top companies where Wellington is booking profit and selling its holdings. The following is a list of its top 7 sells in the last quarter.

Stock

Symbol

Shares Held 03/31/2011

Shares Held 06/30/2011

Change in Shares

Pfizer Inc.

(NYSE:PFE)

251,626,826

184,422,994

-67,203,832

UnitedHealth Group

(NYSE:UNH)

77,225,190

62,115,215

-15,109,975

ACE Limited

(NYSE:ACE)

32,903,411

21,664,259

-11,239,152

Cephalon Inc.

(NASDAQ:CEPH)

7,839,006

1,240,427

-6,598,579

Staples, Inc.

(NASDAQ:SPLS)

56,151,272

30,397,314

-25,753,958

Raytheon Co.

(NYSE:RTN)

15,118,899

7,032,540

-8,086,359

Green Mountain Coffee Roasters Inc.

(NASDAQ:GMCR)

17,770,453

13,271,587

-4,498,866

Source: 13F filing

One of the stocks in above list where I don't agree with Wellington, and would actually like to go long, is Pfizer. Pfizer clearly stands out as the defensive play in the current uncertain environment. It offers an attractive mix of:

  1. Inexpensive valuation, with current year P/E of just 8x
  2. Multiple catalysts in the form of Phase III data or FDA approval for many late-stage drugs in second half of 2011.
  3. High FCF and dividend yield
  4. Limited earnings risk

Last month, the company won a case against Teva Pharmaceuticals (NYSE:TEVA) which would prevent Teva from receiving approval for a generic form of Viagra until October 2019. Most of the sell-side analysts were assuming Viagra would lose exclusivity in 2012. The recent ruling can add 5-10 cents in incremental annual EPS for Pfizer till 2019.

More recently, the company received FDA’s approval for its drug Xalkori (crizotinib, 100% owned) for lung cancer with ALK rearrangements. Also, BMY (50-50 partner) reported strong Phase III Eliquis (apixaban) data in atrial fibrillation. Both are significant positives for the company, and each presents a $1 billion-plus potential opportunity.

Goldman Sachs' analyst recently raised his estimates for the company, noting that new products should help drive earnings growth.

Here are some specifics about the other companies on the list:

UnitedHealth Group Incorporated is a diversified health and well-being company. The company operates in four segments: Health Benefits, OptumHealth, Ingenix, and Prescription Solutions. UnitedHealth's EPS forecast for the current year is $4.37 and next year is $4.77. According to consensus estimates, its top line is expected to grow 7.80% in the current year and 6.70% next year.

ACE Limited is a global insurance and reinsurance organization, serving the needs of commercial and individual customers in more than 170 countries. The company serves the property and casualty insurance and reinsurance needs of businesses of all sizes in a range of industries. It also provides specialized insurance products, such as personal accident, supplemental health, and life insurance, to individuals in select countries. ACE operates in four business segments: Insurance-North American, Insurance-Overseas General, Global Reinsurance, and Life. ACE's EPS forecast for the current year is $6.54 and next year is $7.46. According to consensus estimates, its top line is expected to grow 8.80% in the current year and 2.50% next year.

Cephalon, Inc. is a global biopharmaceutical company dedicated to discovering, developing and bringing to market medications to improve the quality of life of individuals around the world. The company is engaged in providing medicines to patients in several therapeutic areas, with a particular focus on central nervous system disorders, pain, oncology, inflammatory disease and regenerative medicine. Cephalon's EPS forecast for the current year is $8.20 and next year is $5.47. According to consensus estimates, its top line is expected to grow 9.30% in the current year and decline 14.40% next year.

Staples, Inc. is an office products company. The company operates three business segments: North American Delivery, North American Retail, and International Operations. Staples' EPS forecast for the current year is $1.40 and next year is $1.54. According to consensus estimates, its top line is expected to grow 3.10% in the current year and 2.70% next year.

Raytheon Co. is a technology company and specializes in defense, homeland security and other government markets. The company provides electronics, mission systems integration and other capabilities in the areas of sensing, effects and command, control, communications and intelligence systems, as well as a range of mission support services. Raytheon's EPS forecast for the current year is $5.00 and next year is $5.52. According to consensus estimates, its top line is expected to grow 2.30% in the current year and 1.30% next year.

Green Mountain Coffee Roasters, Inc. is engaged in the specialty coffee and coffee maker businesses. The Company operates in two business segments: the Specialty Coffee business unit and the Keurig business unit. GMCR's EPS forecast for the current year is $1.65 and next year is $2.61. According to consensus estimates, its top line is expected to grow 99.10% in the current year and 60.90% next year.

Source: Wellington's Top 7 Sells (And Why It's Wrong About Pfizer)