Aberdeen Asset Management Is Selling These Stocks

Includes: APA, BP, EMR, HES, MET, PM, SPP, STT
by: The Analyst Hub

Aberdeen Asset Management PLC is an investment advisory and hedge fund firm managing over $55 bn in equities. I discussed the Top 7 Buys of Aberdeen in a previous article. In addition to buys, it is also interesting to have a look at top companies where Aberdeen is booking profit and selling its holdings. The following is a list of its top seven sells from the last quarter according to its latest 13F filing with SEC.



Shares Held - 09/30/2011

Shares Held - 12/31/2011

Change in shares

Philip Morris International Inc.





Metlife Inc.





Hess Corporation





Paccar Inc.





Apache Corp.





Emerson Electric Co.





State Street Corp.





I believe Paccar is a good short candidate among above stocks. However, I don't agree with Aberdeen on Hess and Apache and believe they are a buy instead of sell at current levels.

Paccar Inc. designs, manufactures and distributes light, medium and heavy duty trucks and related aftermarket parts in North America and Europe. Its trucks are marketed under Kenworth and Petrbilt nameplates in North America and under DAF brand in Europe.

Paccar is overexposed to developed markets as a third of its revenues are from North America while Europe accounts for over half of its revenues. Against a slowing macro backdrop in Europe, demand for trucks is expected to decline in 2012 following several years of above trend truck sales and overall young fleet age. Further with a weakening Euro against Dollar, the company's margins from Europe sales are likely to be under pressure.

In North America freight trends have been better than Europe; however I see little upside potential to the earnings estimates, especially after weak growth in aftermarket parts business and lingering economic uncertainties limiting fleet expansion. PCAR is currently trading at 13.5x (P/E), which is on the higher end of its industry range. With highly volatile cash flows due to heavily levered exposure towards EU markets, I recommend a sell.

Apache Corporation is an American energy company. It engages in exploration, development and production of natural gas, crude oil and natural gas liquids. Its core assets are in the United States, Canada, Egypt, the United Kingdom North Sea, Argentina and Western Australia.

I am bullish on APA due to its highly accretive acquisition of Cordillera Energy (CEP) for $2.85 billion. With this acquisition, APA has expanded its footprint by doubling its acreage in the liquid- rich Anadarko basin/Granite Wash play in Texas and Oklahoma. This also improves its asset mix, with more focus on liquids, which sell at a premium to natural gas. Due to improved economics of its acquired Granite Wash play, margins are expected to be higher.

Looking at the near term, the balance sheet looks strong, as 21% of the Cordillera deal will be financed by equity, and it is expected that CEP's assets will be self-funding from 2013 onwards. Going forward, APA expects to triple its production by 2015 by taking the rig count to over 40. The CEP acquisition has also presented APA with a strong drilling inventory of 2000 locations for the next few years, pointing to a steady long-term growth. From valuation point of view, the current levels reflect a lower trading multiple compared to its historical range and provide attractive risk reward proposition.

Hess Corp. is a global integrated energy company that operates in two segments: Exploration and Production, and Marketing and Refining.

Hess has significantly underperformed its large-cap U.S. oil and gas peers in the recent past. The main reasons for it were the operating difficulties, which the company faced in recent quarters. Two of the main problems were weather difficulties in the Bakken and a fire at BP (NYSE:BP)-operated Valhall field. Both these problems are solved now. Valhall, the main factor behind an earnings miss last year, is back on stream and the production ramp in the Bakken is under way. I believe the worst of the operating problems are now behind us and production targets likely to move higher in 2012. After the recent decline Hess is trading at just 66% of its NAV. I believe it's a good buying opportunity in the stock.

One of the other things that make me confident in recommending Hess Corp. is that I don't see oil going back to 2008 lows. I think commodities will hold up much better as compared to 2008 recession if there is any downturn now. This is mainly due to an amount of quantitative easing done by the Fed, which is likely to fuel inflation. Since oil companies usually trade in line with crude oil prices, Hess will outperform even if there is another recession.

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