Wellington Funds' Top 7 New Positions

|
 |  Includes: AIG, CHSI, FMX, GT, MDT, MTOR, YUM
by: The Analyst Hub

Wellington Management Company, LLP is an investment advisory and hedge fund firm managing over $300 billion in equity assets. The firm manages 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.

Investment Strategy: Wellington Management employs various strategies covering domestic and international markets. The firm looks for attractive investments across different market-cap and style spectrums. The investment process generally involves understanding global trends and outlooks for securities and sectors, and evaluating potential candidates on valuation, models, opinion and recommendations from different sources. The global value strategy focuses on financially sound companies that are out of favor, display potential for above average returns, and are selling at low P/E ratios. The stock selection process combines fundamental research and valuation analysis from both quantitative and qualitative perspectives. Investments are primarily made in large-cap companies in developed markets, as well as in global companies located in emerging markets. Wellington Management Company also applies capital markets, currency, macroeconomic and technical analyses. The firm carries out proprietary research shared by various teams located globally.

I have previously discussed the top stocks where Wellington is increasing its position. In addition, it is also interesting to have a look at the top new stocks which Wellington is buying. The following is a list of the top 7 new stocks Wellington bought last quarter.

Stock

Symbol

Shares Held 03/31/2011

Shares Held 06/30/2011

Change in Shares

Covidien Plc.

(COV)

0

16,401,576

16,401,576

American International Group

(NYSE:AIG)

0

10,537,100

10,537,100

Goodyear Tire & Rubber Co.

(NASDAQ:GT)

0

12,258,616

12,258,616

Meritor Inc.

(NYSE:MTOR)

0

10,398,580

10,398,580

Catalyst Health Solutions Inc.

(NASDAQ:CHSI)

0

2,858,769

2,858,769

Fomento Econ

(NYSE:FMX)

0

1,910,500

1,910,500

YUM Brands Inc.

(NYSE:YUM)

0

1,854,733

1,854,733

Click to enlarge

Source: 13F filing

My favorite stock among the above list is Covidien Plc. Covidien Plc is engaged in the development, manufacture and sale of healthcare products for use in clinical and home settings. The company operates its businesses through three segments: Medical Devices, Pharmaceuticals and Medical Supplies. EPS forecast for the current year is $3.92 and next year is $4.29. According to consensus estimates, its top line is expected to grow 10.50% in the current year and 4.40% next year.

On its recent analyst day, Covidien confirmed stable volumes which is reassuring given the tough macro environment. Covidien gave a wide range of revenue and margin guidance on the analyst day, which did cause some concerns among investors. However, I believe it was more a factor of conservatism on the part of management rather than any fundamental weakness in the business. Most of the analyst remain comfortable with the higher half of the range, and a Deutsche Bank analyst has recommended buying Covidien on current weakness.

For other stocks in the above list, here are some of the specifics, including a brief description of their businesses and growth expectations (top line and bottom line):

American International Group, Inc. is an international insurance organization serving customers in more than 130 countries. AIG companies are providers of life insurance and retirement services in the United States. It has three segments: Chartis, SunAmerica Financial Group (SunAmerica) and Financial Services. AIG's EPS forecast for the current year is $3.38 and next year is $3.05. According to consensus estimates, its top line is expected to decline 30.80% in the current year and 0.40% next year.

The Goodyear Tire & Rubber Company is a manufacturer of tires. The company, along with its subsidiaries, is principally engaged in the development, manufacture, distribution and sale of tires and related products and services worldwide. Goodyear also manufactures and markets rubber-related chemicals for range of applications. Goodyear's EPS forecast for the current year is $1.59 and next year is $2.17. According to consensus estimates, its top line is expected to grow 24.80% in the current year and 6.30% next year.

Meritor, Inc., formerly ArvinMeritor, Inc., is engaged in providing drivetrain mobility and braking solutions for original equipment manufacturers of trucks, trailers and specialty vehicles, as well as the related aftermarkets in the transportation and industrial sectors. Its customer base includes motor carriers of all sizes, original equipment dealers, independent distributors and others. Meritor's EPS forecast for the current year is $0.59 and next year is $1.90. According to consensus estimates, its top line is expected to grow 30.10% in the current year and 14.80% next year.

Catalyst Health Solutions, Inc. is a full-service pharmacy benefit management company. The company operates under the brand name Catalyst Rx. Catalyst Health Solutions' EPS forecast for the current year is $2.35 and next year is $2.96. According to consensus estimates, its top line is expected to grow 41.40% in the current year and 19.30% next year.

Fomento Economico Mexicano SAB de CV (FEMSA) conducts its operations through the following principal sub-holding companies:

  • Coca-Cola FEMSA, which engages in the production, distribution and marketing of soft drinks;
  • FEMSA Comercio, which operates convenience stores; and
  • CB Equity, which holds FEMSA's investment in Heineken.

FEMSA's EPS forecast for the current year is $3.72 and next year is $4.39. According to consensus estimates, its top line is expected to grow 15.80% in the current year and 13.10% next year.

YUM Brands, Inc. is a quick-service restaurant company, with more than 37,000 units in more than 110 countries and territories. YUM, through its five concepts - KFC, Pizza Hut, Taco Bell, Long John Silver’s and A&W All-American Food Restaurants - develops, operates, franchises and licenses a worldwide system of restaurants, which prepare, package and sell a menu of competitively priced food items. YUM's EPS forecast for the current year is $2.85 and next year is $3.21. According to consensus estimates, its top line is expected to grow 7.90% in the current year and 5.80% next year.

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