4 Big Buys From Hedge Fund Legend Paul Tudor Jones

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Includes: AAPL, APC, GMCR, SU
by: Vatalyst

Hedge fund legend Paul Tudor Jones added a number of positions to his portfolios in the second quarter of this year. Though the next round of earnings reports are due at the end of month, I review these four Jones picks here to see if they are on track to fare well in light of continued weak economic indicators.

Green Mountain Coffee Roasters (NASDAQ:GMCR) – This specialty coffee maker and single-serving brewing innovator is trading near $95 a share. Its 52-week range is $26.14 to $115.98. It does not pay a dividend. Earnings per share is $1.03, and its price to earnings ratio is 91.38. Market capitalization is $14.21 billion. Net sales for the quarter ended June 25 were $717.2 million, up 127 percent from $316.6 million for the same period 2010. Net income for the most recent quarter was $56.3 million, up 206 percent from $18.4 million for the same quarter 2010.

Company officials attribute the increased performance to continued sales of its popular Keurig single-cup brew systems, seasonal popularity of its iced coffee and tea products, and an effective advertising and marketing program initiated in the spring. The company reduced its outstanding debt shown on its balance sheet to $421.9 million for the quarter ended June 25 from $1.06 billion for the same period last year. Management remains optimistic about the company’s performance and increased expected net sales for the coming quarter to grow by 100 percent to 105 percent instead of by previous estimates of 82 to 87 percent. Official expects growth to continue into fiscal 2012, with total net sales growth of 60 to 65 percent

Peet’s Coffee & Tea Inc. (NASDAQ:PEET) is currently trading near $59 a share, which is toward the higher end of its 52-week range of $33.70 to $63.99. PEET doesn’t pay a dividend. Earnings per share is $1.54, and price to earnings ratio is $37.98. Market capitalization is $756.47 million.

According to PEET’s management, net revenue for the quarter ended July 3, 2011 was $90.6 million up from $80.8 million for the same period 2010, or an increase of 12 percent. Net income was $5.1 million, up from $4.3 million for the same quarter 2101, or 16 percent. Company officials also expect annual results to be higher than forecast, with net revenue growing by 10 to 12 percent instead of by 8 to 10 percent. The increase is attributed to healthy sales across all segments, but in particular, its grocery business.

Coffee stocks in general have performed well for most of 2011, but some equities researchers feel the trend could be ending. Coffee bean prices remain high, thanks to demand outpacing supply. According to the International Coffee Organization’s August 2011 monthly market report, production for 2010/2011 is estimated at 133.3 million bags. This is an 8.2 percent increase over the previous year’ production. Consumption is estimated at 134.8 million bags, which is an increase of only 2.1 percent over the previous year’s consumption. Companies have raised their prices to cover the increased cost of beans, but recent earnings reports suggest higher prices haven’t yet cut demand.

GMCR offers a socially responsible brand, supports fair trade, buys sustainably grown coffee beans, and works to offset its own direct greenhouse gas emissions. Its products are priced accordingly. The holiday buying season is just around the corner, which bodes well for the company’s short-term performance. GMCR shares are expensive, however, and they are trading toward the higher end of the annual range.

I have questions about how whether American consumers, who are plagued by lingering recession, unemployment, under-employment, debt, and inflation, will continue to buy single-serving coffee machines, which start at $79.95, and continue to stock single-serving brew packs. I can see GMCR continuing to perform in the short to medium terms, at least through the holiday season, but I have concerns about its ability to sustain performance at this rate into the long run.

Suncor Energy Inc. (NYSE:SU) – This Canadian integrated energy company is currently trading near $28 share. It has fluctuated between $22.55 and $48.53 over the past 52 weeks. Its dividend yield is 1.7 percent or $0.45 a share. Earnings per share is $2.37, and its price to earnings ratio is 11.87. Market capitalization is $44.31 billion. Net earnings for the second quarter 2011 were $562 million CAD, which was up from $540 million CAD for the same period 2010. Production from the oil sands segment of SU’s business were down for the second quarter 2011, averaging 243,400 barrels per day versus 295,500 barrels per day for the same period 2010. Reduced production is attributed to maintenance projects. Company officials expect steady production through the end of this year.

SU has received recent media attention for the benefits it will gain from industry colleague TransCanada’s (NYSE:TRP) controversial Keystone pipeline. The project entails the construction of 1,600-mile pipeline from Alberta, Canada, to the southern United States’ Gulf Coast. Supporters believe the Obama administration will have to approve the project, because of the improved national security the pipeline will offer, new jobs created, historically strict permitting processes to insure disaster prevention and mitigation, and the trade opportunity with ally Canada.

Opponents are concerned about the environmental impacts of oil sands production on the environment, citing heavier energy requirements for extracting the crude; vast amounts of water needed; huge, unsightly open pits that are likely to leech toxins; and more. This is a method crucial to extraction of oil in the regions served by the Keystone pipeline. SU is an industry leader in oil sands production.

TransCanada Corp. (TRP) is currently trading near $41 a share, which is toward the higher end of its 52-week range of $34.77 to $45.09. Its dividend yield is 4.10 percent, or $1.64 a share. Earnings per share is $1.95, and its price to earnings ratio is 21. Market capitalization is $28.85 billion. The company reported second quarter earnings of $357 million, up 30 percent from $275 million for the same period 2010.

TRP officials plan to focus on completing the Keystone U.S. Gulf Coast Expansion, which is expected to generate sustainable earnings and cash flow in the long term as it begins operation. Management expects the Obama administration to issue a decision on a permit by the end of the year.

OPEC cut demand for oil for the remainder of 2011 and 2012 due a weakening economic outlook, Chinese policies to reduce transport fuel usage, and higher retail fuel prices in India.

SU plans to continue to invest in developing its oil sands operations. It remains on a track for growth. The Keystone project is promising, and oil sands production is imminent. Its stock is reasonably priced, and it pays a small dividend. I see SU as a long-term performer.

Apple Inc, (NASDAQ:AAPL) – Currently trading near $400 a share, the personal computer and mobile device manufacturer is at the higher end of its 52-week range of $292.40 to $422.86. It does not pay a dividend. Earnings per share is $25.28, and price to earnings ratio is 15.82. Market capitalization is $371.10 billion.

For the third quarter ended June 25, AAPL reported record annual revenue of $28.57 billion, which was up 82 percent from the $15.70 billion reported for the same period 2010. Current quarterly net profit of $7.31 billion is up from third fiscal quarter 2010’s $3.25 billion. Company officials also reported that iPhone sales were up 142 percent over the same period 2010, iPad sales were up 183 percent, and Mac computer sales were up 14 percent. iPod sales were down 20 percent. It was the company’s best quarter ever.

A report issued by tech market research specialist In-Stat indicates the average household will own at least four Apple devices by 2015. Predictions show strong growth in smartphone shipments. Volume for this year at an estimated 468 million is up 58 percent over last year, and 2012 forecasts call for orders for 630 million smartphones, or an increase of 35 percent. By 2015, shipments are expected to rise to 1.1 billion.

On Tuesday, Oct. 4, AAPL’s new smartphone was unveiled, and reports circulated that consumers and investors were disappointed that the iPhone 4S was too much like its predecessor than an anticipated radically new iPhone 5. The next day, AAPL founder and mastermind Steve Jobs died. Pre-ordering opened on Oct. 7, and AAPL officials say the 1 million-plus orders taken the first day broke a record set by last year’s model.

Over the past week, the iPhone 4S’s cool new features have surfaced, like its Siri voice command assistant that will send messages for users, place calls, set reminders, and more. The base model costs $200 with a two-year contract.

Factors that could contribute to continued successful iPhone 4S sales include the fact that the phone is available in more countries than its predecessor was last year, and that AAPL expanded the number of carriers in each country that could sell it. In the U.S., AT&T (NYSE:T) was the only iPhone carrier last summer. This year, Verizon Communications Inc. (NYSE:VZ) subsidiary Verizon Wireless, and now Sprint Nextel Corp. (NYSE:S), have been added to the mix. T took orders for over 200,000 iPhone 4Ss in the first 12 hours of sales, company officials said.

T is currently trading near $29 a share with a 52-week range of $27.20 to $31.94. Its dividend yield is very attractive at 6 percent or $1.71. Earnings per share is $3.44, and price to earnings ratio is 8.38. Company officials reported strong second quarter results. Consolidated revenues of $31.5 billion for the quarter ended June 30 were up 2.2 percent from the second quarter 2010. T sold 5.6 million smartphones, the most ever in a quarter, during the second quarter, which comprised nearly 70 percent of total postpaid sales. Activations for iPhones remained strong, with officials reporting 3.6 million activations, 24 percent of which were new T subscribers.

Analyst recommendation consensus for AAPL remains a “Buy.” The company boasts a strong track record and a bright outlook. Brand loyalty is extremely strong. AAPL products, however, are still expensive at a time when incomes continue to shrink and economic indicators continue to disappoint. Shares are trading near an annual high. While Jones’ purchase makes sense, I don’t think AAPL is an investment for everybody.

Anadarko Petroleum (NYSE:APC) – This oil exploration and production company is currently trading near $67. Its 52-week range is $55.65 to $85.50. Its dividend yield is 0.60 percent or $0.36. Earnings per share is $1.68, and price to earnings ratio is 39.54. Market capitalization is $33.15 billion. APC reported product revenue of $3.5 billion, up 46 percent over the same quarter 2010. Earnings before interest, tax, depreciation and amortization was $6.37 billion. Its balance sheet showed $3.41 billion in cash and $13.23 billion in total debt.

Company officials attribute strong results to record liquids sales volumes, among other things. A $1.6 billion joint venture in the Eagleford Shale was closed during the second quarter, and the Wattenberg Plant in Colorado was purchased.

APC company officials expect the next two or three quarters to be the most active for deepwater exploration and appraisal drilling in the history of the company. Management signed five-year contracts for two drill ships. APC was named as a defendant in a lawsuit filed by Halliburton, which pursued fraud claims related to the Macondo well blowout that caused the Gulf of Mexico oil spill of 2010. The case was dismissed because Halliburton had missed its filing deadline.

Reports keep circulating about the time being ripe for mergers and acquisitions in the oil and natural gas industries, and APC management has pondered selling stakes worth billions in some of its most desirable assets to raise funds for exploiting other fields. Samson Investment Co., a private oil and gas company based in Oklahoma, is reported to be exploring a partnership or sale, though no additional details are known at this time.

BP Plc (NYSE:BP) is currently trading near $38 a share. Its 52-week range is $33.62 to $49.50. Its dividend yield is 4.5 percent or $1.68 a share. Earnings per share is $6.28, and price to earnings ratio is 6.11. Its market capitalization is $121.09 billion. Company officials reported revenue of $337.41 billion, which is up 37.50 percent over the same period last year. Earnings before interest, tax, depreciation and amortization was $32.68 billion. BP’s second quarter balance sheet showed $20.16 billion in total cash and $49.89 billion in total debt.

APC is poised for growth. It is trading near the middle of its 52-week range. The snapshot of its metrics looks good, and it pays a dividend, albeit small. The speculation surrounding expansion through possible mergers and acquisitions is certainly intriguing. APC is a stock to keep an eye on, at least.

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