5 Buy Ideas From John Hussman's Funds

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Includes: A, KO, MAT, STJ, XOM
by: Vatalyst

Dr. John Hussman is the principal and key shareholder of Hussman Econometrics Advisors, the investment advisory firm that manages the Hussman Funds. The Hussman Strategic Growth Fund, from inception and over an eight-year period, averaged 9.9% a year, with a cumulative gain of 118%. Today Hussman manages over $6 billion in funds. In this article we will examine 5 stocks held in his investment portfolio as part of our search for growth opportunities in a volatile stock market.

Exxon Mobil Corporation (NYSE:XOM)

Exxon Mobil Corporation has a market cap of $358.34 billion, with a price-to-earnings ratio of 9.72. Its 52-week trading range is $55.94 to $88.23, and its last trading price was $73.70.

The company reported second-quarter 2011 earnings of $125.49 billion, an increase from first-quarter earnings of $114 billion. Second-quarter net income was $10.68 billion, an increase from first-quarter net income of $10.65 billion. It has quarterly revenue growth of 36.30%, with a return on equity of 24.69% and it pays a dividend with a yield of 2.50%.

One of Exxon Mobil Corporation's closest competitors is BP Plc (NYSE:BP), which last traded at $38.61 and has a market cap of $121.88 billion. It has a price-to-earnings ratio of 6.15, quarterly revenue growth of 37.50% and a return on equity of -2.78%. BP pays a dividend with a yield of 4.20% versus Exxon Mobil Corporation’s 2.50%.

The Hussman Strategic Growth Fund holds 1,000,000 shares of Exxon Mobil Corporation. The fund sold 1,000,000 shares in the fourth quarter 2010, ending its position in the company. It established a new position in the second quarter 2011, purchasing 1,000,000 shares at an average price per share of $82.34.

Exxon Mobil Corporation’s second-quarter 2011 balance sheet showed a cash position of $8.533 billion, a decrease from its first-quarter cash of $13.234 billion. This can be attributed to increased research and development expenses, which rose for the second quarter to $592 million, from $334 million for the first quarter. When considered in conjunction with quarterly revenue growth of 36.30% and a return on equity of 24.69%, it indicates that Exxon Mobil Corporation is soundly managed and well positioned for further growth.

The boom in demand for resources driven by the growth of the Chinese economy indicates further opportunities for strong revenue growth. When combined with a weak dollar, which should make U.S. exports more competitive, and a stronger-than-expected manufacturing sector, it bodes well for oil and natural gas demand and producers like Exxon Mobil Corporation.

I agree with Hussman's decision to purchase this stock, and rate Exxon Mobil Corporation as a buy.

St. Jude Medical Inc (NYSE:STJ)

St. Jude Medical Inc has a market cap of $13.97 billion with a price-to-earnings ratio of 15.81. For a 52-week period its trading range has been $36.82 to $54.18. Its last trading price was $42.40.

It reported second-quarter 2011 earnings of $1.45 billion, an increase from first-quarter earnings of $1.38 billion. Second quarter net income was $240.89 million, an increase from first quarter net income of $233.43 million. St. Jude Medical Inc has quarterly revenue growth of 10.20% and a return on equity of 20.44 %. It pays a dividend with a yield of 1.90%.

One of St. Jude Medical Inc’s closest competitors is Boston Scientific Corporation (NYSE:BSX). Boston Scientific Corporation last traded at $6.31 and has a market cap of $9.66 billion. It has a price-to-earnings ratio of 15.89, quarterly revenue growth of 2.40% and a return on equity of 5.50%. It does not pay a dividend.

The Hussman Strategic Growth Fund holds 1,000,000 shares of St. Jude Medical Inc. The fund purchased all 1,000,000 shares in Q2 2011 at an average price of $50.66.

St. Jude Medical Inc commenced paying a dividend with a yield of 1.90% in Q1 2011. Its cash position has improved, and its second-quarter 2011 balance sheet showed $832.817 million in cash. Its quarterly revenue growth rate of 10.20% is lower than the industry average of 14.60%, but it has a return on equity of 20.44%, which is substantially greater than the industry average of 13.60%.

This indicates a well-managed company that is positioned for growth, which is outperforming many of its peers, explaining Hussman’s decision to purchase this stock. I rate St. Jude Medical Inc as a buy.

Agilent Technologies Inc (NYSE:A)

Agilent Technologies Inc has a market cap of $12.14 billion with a price-to-earnings ratio of 12.20. For a 52-week period its trading range has been $30.22 to $55.33. Its last trading price was $34.96.

It reported second-quarter 2011 earnings of $1.69 billion, an increase from first quarter earnings of $1.68 billion. Second-quarter net income was $330.00 million, an increase from first-quarter net income of $200.00 million. Agilent Technologies Inc has quarterly revenue growth of 22.20% and has a return on equity of 28.92%. It does not pay a dividend.

One of Agilent Technologies Inc's closest competitors is Danaher Group (NYSE:DHR). Danaher Group last traded at $46.01, and has a market cap of $31.54 billion, with a price-to-earnings ratio of 14.35. It pays a dividend with a yield of 0.20%. It has quarterly revenue growth of -3.50% versus Agilent Technologies' 22.20% and a return on equity of 15.64% versus Agilent's 28.92%.

Agilent Technologies Inc's cash position has improved; its second-quarter balance sheet showed $3.1 billion in cash, an increase from $2.975 billion for the first quarter. It has a quarterly revenue growth rate of 22.20% versus the industry average of 6.70% and a return on equity of 28.92% versus the industry average of 10.80%. This indicates it is a well-managed company that is well-positioned for further growth, which is outperforming many of its industry peers. I agree with Hussman’s decision to purchase this stock and rate Agilent Technologies as a buy.

Coca-Cola Company (NYSE:KO)

Coca-Cola Company has a market cap of $161.85 billion. For a 52-week period its trading range has been $57.55 to $71.77. Its last trading price was $70.49.

The company reported second-quarter 2011 earnings of $12.74 billion, an increase from first-quarter earnings of $10.52 billion. Second-quarter net income was $2.80 billion, an increase from first-quarter earnings of $1.90 billion. The company is achieving quarterly revenue growth of 46.80% with a return on equity of 40.83%. It pays a dividend with a yield of 2.60%.

One of Coca-Cola Company's closest competitors is PepsiCo Inc (NYSE:PEP). PepsiCo Inc last traded at $60.56 and has a market cap of $95.84 billion with a price-to-earnings ratio of 15.41. It has quarterly revenue growth of 13.70% and a return on equity of 28.65%. PepsiCo Inc pays a dividend with a yield of 3.30% versus Coca-Cola Company´s 2.60%.

The Hussman Strategic Growth Fund holds 1,750,000 shares of Coca-Cola Company. The fund sold 1,250,000 shares in Q4 2010 at an average price of $62.79, leaving a holding of 500,000 shares. It purchased a further 500,000 shares in Q1 2011 at an average price of $63.78, with another purchase of 750,000 shares in the second quarter at an average price of $66.85.

Its cash position has improved, and its second-quarter balance sheet showed $10.166 billion in cash, an increase from first-quarter cash of $8.922 billion. With a quarterly revenue growth rate of 46.80% versus an industry average of 14.30% and a return on equity of 40.83% versus an industry average of 26.70%, it is performing better than its peers. The Coca-Cola Company has been consistently paying a dividend since 1962, with a recent 3 cent per share increase in the dividend in the first quarter of 2011, which is a 6% increase in yield.

The Coca-Cola Company has a strong global franchise, and a weak dollar should make U.S. exports more competitive. This explains Hussman’s decision to purchase the stock, and I rate the Coca-Cola Company as a buy.

Mattel Inc (NASDAQ:MAT)

Mattel Inc has a market cap of $9.23 billion with a price-to-earnings ratio of 13.80. For a 52-week period its trading range has been $22.01 to $28.49. Its last trading price was $26.93.

The company reported second-quarter 2011 earnings of $1.16 billion, an increase from first-quarter earnings of $951.86 million. Second-quarter net income was $80.53 million, a substantial increase from first-quarter net income of $16.61 million. This can be attributed to an increase in operating income for the second quarter 2011 of $109.27 million versus $36.76 million for the first quarter.

The company has quarterly revenue growth of 14.10% and a return on equity of 27.19%. The company has consistently paid a dividend since 1982, with a recent 2.25 cent per share increase in the dividend in first quarter 2011. This is an increase in yield of 10.84% and represents a current total dividend yield of 3.40%

One of Mattel Inc’s closest competitors is Hasbro Inc (NASDAQ:HAS). It last traded at $35.73 and has a market cap of $4.80 billion with a price-to-earnings ratio of 13.56. It pays a dividend with a yield of 3.30% versus Mattel Inc’s 3.40%. Hasbro Inc has quarterly revenue growth of 23.10%, which is greater than the 14.10% generated by Mattel Inc.

Mattel Inc’s cash position has worsened: The second-quarter 2011 balance sheet showed $ 418.476 million in cash, a substantial decrease from first-quarter cash of $1.049 billion. It is, however, important to note that Mattel had a substantial increase in net income for the second quarter.

It has a quarterly revenue growth rate of 14.10% versus the industry average of -11.90% and a return on equity of 27.19% versus the industry average 23.80%. This indicates it is performing better than most of its industry peers. Mattel Inc has a strong global franchise, and the weak dollar should make U.S. exports more competitive. These factors explain Hussman’s decision to purchase the stock, and I rate Mattel Inc as buy.

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