In this installment of my analysis of recent purchases made by renowned investors and funds, I will look at 5 stocks bought by Moore Capital Management using the latest available SEC filings of the fund. Moore Capital Management (MCM) has equity positions worth $2.1 billion. In addition to estimating the price MCM might have paid for the stocks, I have also calculated my preliminary price targets using relative valuation to judge the attractiveness of these companies at current prices. Based on this analysis, I have shortlisted 5 stocks that offer a minimum return of 20% from current levels.
Sectors represented on the list include Basic Materials, Healthcare, Consumer Cyclical, Services, and Energy.
1) Parker-Hannifin Corporation. (NYSE:PH)
PH is a manufacturer of fluid power systems, electromechanical controls, and related products. The company has a market capitalization of $12.4 billion and has easily outperformed the broader markets during the last 5 years returning 52% to its shareholders compared to the decline of 7% in the S&P500. The company's projected long term earnings growth rate of 6% is double the growth rate of the previous 5 years.
Moore Capital Management initiated a position in PH by acquiring 28,000 shares at an estimated average price of $73 which is 14% below yesterday's closing price of $83 a share. Applying my estimated P/E of 13 to 2013 EPS estimate of $7.8, my initial 12-18 month price target for PH is $102 a share. A return of 22% is possible from current levels.
2) Pfizer Inc. (NYSE:PFE)
PFE reported fourth-quarter results on Tuesday topping the Wall Street expectations. This was the first quarterly results since PFE lost U.S. patent protection for Lipitor. The U.S. sales fell 42% and worldwide sales were off by 24%. The company also announced that the planned sale of its animal health and nutrition units would take place between July 2012 and July 2013. The sale is expected to bring $15 billion to the PFE coffers.
The company grew its earnings at a 2% rate during the last 5 years and is now expected to increase its earnings at an annual rate of 3%. Moore Capital Management bought 1.92 million shares during the 3rd quarter, an increase of 236%, and now owns a total of 2.74 million shares of PFE stock. Applying a P/E of 11 to 2012 average analyst EPS estimate of $2.3, my 12-month price target of $25 a share is obtained. Including dividends, the stock is expected to return 22% during the next 12-months.
3) Verizon Communications (NYSE:VZ)
Verizon is a $107 billion communication giant offering communication services in over 150 countries. Like many of its peers, the company pays a healthy dividend of $2 a share yielding in excess of 5%. The company is expected to grow its earnings at an annual rate of 12% during the next 5 years on par with the broader communications industry.
Moore Capital Management practically initiated a new position in VZ by purchasing approximately 1.66 million shares at an estimated average price of $35 a share to its total position in VZ to 1.7 million shares. The stock currently trades at approximately $38 a share. My 12-month price target for VZ is $47 a share obtained by applying a multiple of 19 to 2012 EPS estimate of $2.49.
4) Temper-Pedic International Inc. (NYSE:TPX)
Temper-Pedic manufactures, markets, and distributes mattresses and pillows in approximately 80 countries worldwide. The Lexington, KY based company has a market capitalization of $4.2 billion. TPX reported fourth-quarter results on January 24 and issued 2012 EPS guidance in the range of $3.8 to $3.95 ahead of mean analyst expectations of $3.77. This would imply a 21% growth rate (at midpoint of the guidance). The revenues are expected to increase by 14% this year.
Moore Capital Management initiated a new position in TPX by acquiring 27,200 shares at an estimated average price of $62 10% below its current price of $68 a share. My target of $82 implies an additional return of 23% from current levels.
5) Petroleo Brasileiro SA (NYSE:PBR)
PBR is Brazil's state controlled oil producer. It was in the news yesterday (February 1, 2012) when reports emerged that the company planned to sell $7 billion in overseas bonds to help finance $225 billion of investments in an effort to double its oil output by 2020. Analysts expect the company to grow its earnings at an annual rate of 5% compared to the 16% growth of the industry.
Moore Capital Management initiated a new position in PBR by purchasing approximately 290,000 shares at an estimated average price of $29 a share which is modestly below the current price of $31. Applying my P/E estimate of 11 to 2012 EPS estimate of $3.46 a share, my 12-month price target of $38 is obtained. A return of 23% is possible from current levels.
As always, please do not consider this list as a "buy" list, rather use this list as a starting point for your research. Of the companies listed above, I find PH and TPX particularly attractive based on fundamentals and long-term growth prospects.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.