Seeking Alpha
Profile| Send Message|
( followers)  

This article explores opportunities for increased portfolio growth in volatile markets by reviewing recent stock purchases in the Hussman Strategic Growth Fund founded by Dr John Hussman, who is a Ph.D.investor and is bearish on Europe, particularly Greece. I will review five stocks that were recently purchased by the fund:

Apple Inc (NASDAQ:AAPL)

Apple has a market cap of $375.85 billion with a price to earnings ratio of 16.04. Its 52 week trading range is $275.00 to $422.86. Its last trading price was $405.45. It reported second quarter earnings 2011 of $28.57 billion, an increase from first quarter earnings of $24.67 billion. Second quarter net income was $7.31 billion, an increase from first quarter net income of $5.99 billion. It has quarterly revenue growth of 82% and a return on equity of 42.71%. Apple Inc does not pay a dividend.

One of Apple Inc´s closest competitors is the Hewlett-Packard Company (NYSE:HPQ). Hewlett-Packard last traded at $21.93 and has a market cap of $43.58 billion. It has a price to earnings ratio of 5.15, quarterly revenue growth of 1.50% and a return on equity of 22.73%. All of these performance indicators are lower than Apple Inc, indicating that the company is not performing as strongly. The Hussman Strategic Growth Fund holds 250,000 shares of Apple Inc purchased at an average price of $341.55 per share. Based on Apple Inc’s last trading price, the fund has made a return of 18.71%.

Apple Inc’s second quarter 2011 balance sheet showed cash of $12.09 billion, a decrease from first quarter cash of $15.98 billion. This decrease can be partly attributed to increased research and development expenses for the second quarter of $628 million versus $581 million for the first quarter. This indicates Apple Inc is working to stay ahead of its competitors by investing in research and development in an industry where technological advances quickly become redundant.

Apple Inc’s quarterly revenue growth of 82% versus an industry average of 24.30%, and a return on equity of 42.71% versus an industry average of 31.70%, demonstrates that it is performing better than the majority of its peers.

It has built a strong global franchise in personal computer, portable music player and cellular phone technology. When combined with a weak dollar, that should make U.S. exports more competitive, it bodes well for Apple Inc to continue achieving growth. My only concern is that we have already seen a substantial increase in the share price since the end of second quarter 2011, and it is difficult to predict whether the current share price growth can be sustained. However, based on the performance of the company, I agree with Hussman's decision to purchase this stock, and I rate Apple Inc as a buy.

Archer-Daniels-Midland Company (NYSE:ADM)

Archer-Daniels-Midland Company has a market cap of $16.95 billion with a price to earnings ratio of 8.00. For a 52 week period its trading range has been $25.03 to $38.02. Its last trading price was $28.03. It reported second quarter earnings for 2011 as $22.87 billion, an increase from first quarter earnings of $20.08 billion. Second quarter net income was $381 million, a decrease from first quarter net income of $578 million. The company has quarterly revenue growth of 45.60% and a return on equity of 12.50%. It pays a dividend with a yield of 2.40%.

One of Archer-Daniels-Midland Company´s closest competitors is Bunge Limited (NYSE:BG). Bunge Limited last traded at $56.20 and has a market cap of $8.29 billion. It has a price to earnings ratio of 8.23, quarterly revenue growth of 32% and a return on equity of 8.75%. It pays a dividend with a yield of 1.70%. All of these performance indicators are lower than the Archer-Daniels-Midland Company, and Bunge Limited isn’t performing as strongly.

The Hussman Strategic Growth Fund holds 1,500,000 shares of the Archer-Daniels-Midland Company, and it purchased these shares in second quarter 2011, at an average price of $32.65. Based upon the last trade price, the Hussman Strategic Growth Fund has made a return of -14.15%.

Archer-Daniels-Midland Company´s cash position has improved, its second-quarter 2011 balance sheet showed $4 billion in cash, an increase from the $3.9 billion in the first quarter. Its quarterly revenue growth rate of 45.60% is substantially higher than the industry average of 20.30% and its return on equity of 12.50% is greater than the industry average of 9.20%. This indicates a well-managed company that is outperforming many of its peers, explaining Hussman’s decision to purchase this stock. I rate Archer-Daniels-Midland Company as a buy.

Texas Instruments Incorporated (NASDAQ:TXN)

Texas Instruments Incorporated has a market cap of $31.01 billion with a price to earnings ratio of 10.34. Its 52 week trading range has been $24.34 to $36.71. Its last trading price was $26.84. It reported second quarter 2011 earnings of $3.46 billion, an increase from first quarter earnings of $3.39 billion. Second quarter net income was $672 million, an increase from first quarter net income of $666 million. Texas Instruments has quarterly revenue growth of- 1.10% and a return on equity of 30.39%. It pays a dividend with a yield of 2.50%.

One of Texas Instrument closest competitors is QUALCOMM Incorporated (NASDAQ:QCOM). QUALCOMM Incorporated last traded at $49.98 and has a market cap of $83.94 billion. It has a price to earnings ratio of 20.48 and pays a dividend with a yield of 1.70%. Its quarterly revenue growth of 34.20% is better than Texas Instruments -1.10 %, but its return on equity of 18.04% is lower than Texas Instruments 30.39%.

The Hussman Strategic Growth Fund purchased 1,250,000 shares in second quarter 2011, at an average price of $33.99. Based on the last trading price of $27.74, the Hussman Strategic Growth Fund has made a return of -18.39%.

Texas Instruments' cash position has improved, the second-quarter balance sheet showed $1.32 billion in cash, an increase from $1.18 billion for the first quarter. It has a quarterly revenue growth rate of-1.10 % versus the industry average of 25.20% and a return on equity of 30.39% versus the industry average of 23.50%. This indicates that Texas Instruments is a well-managed company, although its earnings growth rate is well behind that of its peers. At this time, based upon the drop in share price and Texas Instruments negative quarterly earnings growth, I don’t agree with Hussman’s decision to purchase this stock. I rate Texas Instruments as a hold.

Newmont Mining Corporation (NYSE:NEM)

Newmont Mining Corporation has a market cap of $30.82 billion with a price to earnings ratio of 13.93. Its 52 week trading range has been $50.05 to $71.25. Its last trading price was $62.38. The company reported second quarter earnings 2011 of $2.38 billion, a decrease from first quarter earnings of $2.47 billion. Second quarter net income was $387 million, a decrease from first quarter earnings of $514 million. The company is achieving quarterly revenue growth of 1.30% with a return on equity of 20.91%. It pays a dividend with a yield of 1.80%.

One of Newmont Mining’s closest competitors is Barrick Gold Corporation (NYSE:ABX). Barrick Gold Corporation has a market cap of $46.10 billion with a price to earnings ratio of 12.31. It has quarterly earnings growth of 29.70%, a return on equity of 18.72% and pays a dividend with a yield of 0.90%. Based on these performance indicators Barrick Gold Corporation is outperforming Newmont Mining Corporation.

The Hussman Strategic Growth Fund holds 1,700,000 shares of Newmont Mining, purchasing 950,000 shares in first quarter 2011 and 700,000 shares in the second quarter at an overall average price of $55.00 per share. Based on the last trade price the fund has made a return of 13.42%.

Newmont Mining Corporation’s cash position has declined, its second quarter balance sheet showed $1.86 billion in cash, a decrease from first quarter cash of $4.53 billion. With quarterly revenue growth of 29.70% versus an industry average of 59.90%, and a return on equity of 18.72% versus an industry average of 10.5%, it is not a standout performer in its industry.

The gold price has increased by 39.83% over the last year and this increase in the gold price appears to be continuing for the short term, making gold stocks a good investment opportunity. However, I believe there are better investment opportunities in the industry such as Barrick Gold, which is performing more strongly than Newmont Mining Corporation, and is better positioned to capitalize on the increase in the gold price. When this is considered in conjunction with the decline in the company´s cash position, I do not agree with Hussman’s decision to purchase the stock, and rate Newmont Mining Corporation as a hold.

Goldcorp Incorporated (NYSE:GG)

Goldcorp Incorporated has a market cap of $36.41 billion with a price to earnings ratio of 18.35. For a 52 week period, its trading range has been $39.04 to $56.31. Its last trading price was $45.08. The company reported second quarter earnings 2011 of $1.32 billion, an increase from first quarter earnings of $1.22 billion. Second quarter net income was $489 million, a decrease from first quarter net income of $651 million. This can be attributed to an increase in operating expenses for the second quarter 2011 of $765 million, versus $685 million for the first quarter. It has quarterly revenue growth of 56.70%, a return on equity of 10.14% and pays a dividend with a yield of 0.80%

One of Goldcorp’s closest competitors is AngloGold Ashanti Limited (NYSE:AU). AngloGold Ashanti last traded at $42.67 and has a market cap of $16.45 billion. It has a price to earnings ratio of 22.89 and pays a dividend with a yield of 0.50%, which is less than Goldcorp’s yield of 0.80%. AngloGold Ashanti has quarterly revenue growth of 11% and a return on equity of 22.07%, both of which are lower than Goldcorp.

Goldcorp’s cash position has improved in the second-quarter 2011, the balance sheet showed $1.38 billion in cash, an increase from first quarter cash of $1.28 billion. It has a quarterly revenue growth rate of 56.70% versus the industry average of 59.90% and a return on equity of 10.14% versus the industry average 10.50%. This indicates it is performing on par with its peers and has potential future earnings growth that is better than most.

With the gold price increasing by 39.83% over the last year and with gold now trading at $1,640.16 per ounce, in conjunction with HSBC’s forecast that the gold will reach $2025 per ounce in 2012, gold stocks represent a firm investment opportunity. This combined with the high quarterly growth rate and strong cash position of Goldcorp, indicate a company that is well positioned to capitalize on the increasing gold price. I agree with Hussman’s decision to purchase the stock and rate it as a buy.

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

Source: 5 John Hussman Buy Ideas For Profits Now