BlackRock is one of the most influential financial institutions in the world. It manages assets worth ~$ 3.5 trillion. BlackRock will be filing its 13F for the quarter ended December 31, in the next couple of days. Meanwhile it is interesting to have a look at some of its winning buys from the September quarter. These stocks have significantly outperformed S&P500's (SPY) 15% gain since September end with all of them returning north of 20%.
Shares bought in the Sept. quarter
Shares Held as on 09/30/2011
Change in share price since Sep 30th
Marathon Oil Corporation
Marathon Petroleum Corporation
General Dynamics Corp.
Wells Fargo & Company
Prudential Financial Inc.
National Oilwell Varco Inc.
Occidental Petroleum Corporation
Source: 13F filing
I believe Wells Fargo and Occidental Petroleum are likely to continue outperforming the broader markets going forward. However, one stock where I would recommend booking profit is General Dynamics.
Wells Fargo and Company provides retail, commercial and corporate banking services primarily in the United States. It operates in three segments; Community Banking, Wholesale Baking and Wealth, Brokerage and Retirement.
WFC reported fourth-quarter EPS of $0.73 against the market consensus of $0.72. Revenue of $20.1 billion improved 6% quarter-quarter driven by mortgage results and spread income fee. Net Interest Income was also better than expected and loan growth was positive. A combination of lower funding costs and an increase in non-interest bearing deposits has resulted in better interest margins.
WFC remains one of the safest large-cap banking stocks with a relatively strong balance sheet. Its business fundamentals are going in the right direction with improved core loan growth and healthy deposits growth. WFC's asset quality is stable and NPAs reduced by $879 million last quarter. Its capital ratios also continue to improve: Tier 1 common ratio at the end of Q4 was 7.49% under Basel III standards, up by 9bp quarter-quarter, while under Basel I it was 9.46%, up by 12bp quarter-quarter. WFC has also entered into an agreement to buy back 5.6 million shares in Q1 2012. While high operating expenses are a concern, the management reiterated that expense improvement is expected to occur in 2012. I recommend going long on the stock from a medium- to long-term perspective.
Occidental Petroleum Corporation is one of the most profitable of the U.S. large- cap oil companies. The company continues to report strong financial results with cash flow from operations of $8.6 billion for the first nine months of 2011 and annualized ROE of 20%. With 70% of its production linked to Brent, Occidental is expected to generate ~6% of FCF yield in 2012 at current oil prices. In the longer term, even if we adjust for company's capex plan of ~$7bn annually, Occidental is likely to generate ~$20bn of cash by 2016. In the near to medium term, exploration and appraisal results in CA conventional and shale plays are likely to serve as catalysts for the stock.
General Dynamics Corporation offers a portfolio of products and services in business aviation; combat vehicles, weapons systems and munitions; military and commercial shipbuilding, and communications and information technology. General Dynamics operates through four business groups: Aerospace, Combat Systems, Marine Systems, and Information Systems and Technology. I don't like the company given its exposure toward the defense end market. Defense spending in the U.S. is expected to be under pressure for the next several years as government cuts expenditures to improve deteriorating fiscal condition. This is likely to pressure earnings as well as lead to negative sentiments on the industry causing multiple compression for defense stocks.