Here we examine a handful of investment guru Kenneth Fisher’s latest acquisitions. Fisher, a longtime Forbes magazine columnist, holds a powerful belief in the laws of supply and demand as the primary driver of security prices. If he’s buying it’s because he thinks he knows something the rest of us don’t. Over the past decade Kenneth’s Purisima Total Return Fund (PURIX) has returned nearly three times the growth percentage that the S&P 500 (SPY) has. Recently Fisher detailed the reasons for his market bullishness, indicating that the upcoming 2012 Presidential election will be bullish for stocks. Let’s examine this market veteran’s recent buys and see if we can glean any insight about his conclusions.
Gaylord Entertainment Co. (GET): Currently trading in the $23 range, Fisher added this hotel and entertainment behemoth to his portfolio in the third quarter of 2011. Fisher picked up about 2.25 million of the over 48 million shares outstanding, propelling his firm's ownership to nearly 5%. Fisher may have started a trend; recently controversial fund manager Mario Gabelli has also been buying GET. These recent purchases mark a divergence from first quarter GET sales by Gabelli and financial titan George Soros. Indeed the timing of Fisher’s buy may prove fortuitous, although his shares are currently down roughly 9% from his average purchase price around $26. GET reached a recent high in February 2011, and has since experienced a downtrend enduring several months. If supply and demand are in fact king, the demand of these legendary traders and others might be just the kick GET needs to reverse that downtrend. The share price of this security has stabilized in recent weeks, and could begin to climb back toward those winter highs around $38. For its part GET has been getting in front of investors by presenting at both the Bank of America Merrill Lynch Leveraged Finance Conference, and the Deutsche Bank 2011 Hospitality and Gaming Conference.
LSI Corporation (LSI): Although it has seldom forayed into the sub $5 range during the past two decades of trading, LSI has recently emerged from one such excursion and is currently trading around $5.75. Kenneth Fisher entered this security to the tune of over half a million shares. His purchase price averaged over $6.50. If history is to be our gauge, demand for this security should be strong at this level, and Fisher’s bet will again prove his merit as a respected investment manager. In this recent buy Fisher is not alone among institutional investors. LSI has a market cap of $3.23 Billion and 80% of its shares are held by Institutions and Funds. This article touches on the impact of tremendous flooding in Thailand on the ability of LSI and other technology companies to maintain performance. A tragic disaster for residents of Thailand, recent flooding there will likely be little more than a hiccup for LSI. Short-term disruption of the supply chain may ultimately prove a boon to the price of this security.
Annaly Capital Management (NLY): This security has a market cap of over $15 billion and boasts earnings per share of $1.36. Trading down more than a dollar from Fisher’s average entry price of $17.75, NLY shares are now selling for about $16 per share. The current price puts NLY squarely in the middle of its 52-week trading range of $14.05 to $18.79. NLY currently pays a dividend yield above 14%, which provides a nice buffer to offset any losses in the portfolio. It is quite possible that Fisher is using NLY as a portfolio hedge. A P/E ratio under 12 combines with these healthy stats to make this a solid purchase for Mr. Fisher.
ISHARES IBoxx USD Investment Grade Corporate Bond Fund (LQD): Unit prices of this security have climbed slowly and steadily over the past year. The Fund is currently trading in the $112 dollar range, not far from its 52-week high of $115.68. Interestingly, Kenneth Fisher’s purchase in the third quarter of 2011 predated a significant buy-in by investors yet unknown. The fund has seen an influx of capital during early December 2011. Fisher’s holdings of over 6 million units of LQD represent a considerable 4% of the 47 million units outstanding.
Schnitzer Steel Industries Inc. (SCHN): With a market cap of about $1.3 billion SCHN is currently trading near the center of its 52-week trading range of $32.82 to $69.43, near $48. SCHN has earnings per share of about $4.25, and a price-to-earnings ratio near $12. In addition to strong price performance in recent months, SCHN also offers a dividend yield near .1%. Following this purchase in the third quarter of 2011 Fisher holds nearly 1.25 million shares of the 27.2 million outstanding shares of this stock. His average purchase price on this security was $48.67. This steel industry giant may be a well-founded investment for Kenneth Fisher, particularly if he anticipates further weakening of the US dollar. This US producer relies heavily on exports for its revenue growth, which was substantial at nearly 70% in the third quarter of 2011.