The Bank of New York Mellon Corporation (BNY) manages over $78bn in equities through its investment arm BNY Mellon Asset Management. The firm caters to high net-worth individuals, nonprofit organizations and government agencies.
BNY's Investment Approach: BNY Mellon Asset Management offers various strategies and mandates, utilizing a multi-boutique platform that emphasizes specializations among various autonomous teams. The firm's investment coverage spans from active, traditional to alternative investing. BNY Mellon Asset Management employs different investment styles and invests on a global basis. An investment policy committee is responsible for establishing a fundamental economic outlook, general investment strategy, and asset allocation recommendations. The firm's sub-advisory relationships enable it to gain exposure in specialized markets.
As of last quarter, over 80% of the firm's portfolio was deployed in large and mega-cap stocks. With respect to style allocation over 40% of the equity portfolio was value investment, ~25% was growth, ~15% was GARP and remaining was deployed in other investment styles like aggressive growth, arbitrage, etc. The following is a industry wise distribution of the firm's assets as of Dec. 31, 2011.
|Industry||% Portfolio||Val ($MM)||Value Chg ($MM)|
Since its relatively a well diversified fund with significant asset base, just looking at the top holdings might not give a good idea for the stocks it is bullish about. The best gauge of its bullish ideas are the stocks where it has increased its position substantially. The following is a list of top buys (market value wise) by The Bank of New York Mellon 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.
Kraft Foods Inc.
Johnson & Johnson
My favorite long candidates among above stocks are Apple and Kraft Foods. One stock which I would like to avoid from the list is Microsoft.
Apple recently reported excellent quarterly numbers beating even the most optimistic estimates. Its guidance was also better than expected with strong momentum in iPhone and iPad sales. Going Forward, Apple has two good catalysts in 2012 in the form of iPad3 and iPhone5 launch. From a medium- to long-term perspective, Apple's secular growth and market share gains in the smartphone and tablet space is likely to continue for the next several years. Apple's strategy of customer-centric innovation and launching products with potential to create whole new markets is still intact. If one goes by Steve Jobs' biography, Apple TV is likely the next such product in the line. At a valuation of just 9x forward earnings (adjusted for cash), Apple is trading at very attractive levels. I believe it is a good opportunity to go long the stock.
Kraft is the largest U.S. food manufacturer, and second-largest in the world, behind Nestle (OTCPK:NSRGY). I am bullish on Kraft because of its international growth potential and value creation from the planned spin-off.
Kraft is seeing significant growth in international markets, and in the third quarter, developing markets contributed around 66% of incremental year/year segment profits, and international contributed 86%. In the near future, I expect it will continue to enable Kraft to derive faster-than-average peer growth. It will also improve Kraft's debt ratio, enabling it to return more cash to its shareholders in the future.
Another major catalyst for Kraft's stock is its planned split into two companies. Kraft's business consists of its high-growth snacks business and the stable return grocery business. Kraft is planning to split up these two businesses in FY12. This will unlock significant value by highlighting an above peer growth profile of the global snacks business, driving operational improvements, and by allowing each company to pursue different capital allocation priorities.
Kraft is trading at 15x FY12 EPS, which is at discount to its average 10-year historical PE multiple of 16x. I believe this is a good opportunity to initiate a long position in the company.
One stock in the above list that I would like to avoid is Microsoft. Although Microsoft is available at low valuations, I don't like increasingly apparent industry trends which pose risk to Microsoft's leadership position in PC software industry. PC software space has been traditionally dominated by Windows, providing a good defensive business for Microsoft. Growing computer literacy and internet adoption have driven Microsoft's business for past two decades. However, going forward, increasing tablet adoption is going to change the complete industry dynamics.
As tablets continue to take market share from tradition PCs and Laptops, Microsoft is bound to suffer. Microsoft doesn't have any presence in the tablet space as of now. It is going to launch Windows 8 OS this year, which can be used with tablets. However, I believe this late entry will prevent Microsoft from gaining a leadership position in the tablet space, which will have adverse consequence. It might end up being a 3rd player just like what happened in the mobile space. Apple's iOS and Google's Android are the main platforms in the smartphone space and they will likely be tough competition for Microsoft in the tablet space as well.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.