Citigroup recently filed its 13F form for the quarter ended Dec 31, 2011 with SEC. Here are its top five buys from the last quarter:
Shares Held - 09/30/2011
Shares Held - 12/31/2011
Change in shares
Bank of America Corporation
Exxon Mobil Corp.
Apollo Group Inc.
Bank of America, Dell and Exxon are my favorite long candidates among the above stocks. I would also keep a close watch on Apollo Group. It appears that FY12 will likely be a trough year for the Apollo Group and it will resume growth going forward. However, I would wait for next couple of quarters to see the company's actual performance before recommending a buy on it.
Bank of America is trading at over a 40% discount to its tangible book value, making it an attractive buy candidate. Over the past few months, BofA has executed several asset sales that are consistent with management's efforts to strengthen the balance sheet and improve the company's overall capital position. The company reported improvement in its regulatory capital ratios in the most recent earning release and management increased its guidance related to Basel III targets.
In quantitative terms, BofA saw $75 billion reduction in risk-weighted assets (RWA) in 4Q'11, leading to a $171 billion reduction for full-year 2011. Management increased its target Tier 1 common ratio to 7.25- 7.5% by year-end 2012 as pro forma RWA is expected to be $50 billion lower and capital deductions have been significantly reduced. These ratios are still lower than its peers but the trend seems to be headed in the right direction and it is likely that the company will be able to hit Basel required levels. The company is still trading at a significant discount to its peers and as the broader macro situation in Europe continues to improve, I see a good likelihood of the stock continuing its upward journey.
Dell Inc. is one of the world`s largest manufacturers of computers, with worldwide PC market share of ~13% and FY11 revenue of $61 billion. The company offers a full range of IT products and services including desktops, notebooks, PDAs, servers, storage systems, printers, and other peripherals, which it primarily sells to customers using a direct model. The company also provides services and resells third-party peripherals and software.
Dell's recent outperformance has raised investor expectations. I believe its results will be up to the mark when it reports Q4 earnings on February 21. Smarter business practices have helped Dell improve its gross margins profile in 2011 and going forward, it is expected to continue as component pricing trends improve along with a shift in the revenue mix towards non-PC and value add solutions. With its enterprise storage better integrated, Dell could be a serious competitor in storage space, which offers long term growth. Dell also announced the creation of a new software group, which I believe is another step towards transforming the company to more of a solution provider. Dell, with its strong balance sheet and cash flow generation could make strategic acquisitions and repurchase shares. All these factors indicate strong medium term outlook with accelerating revenue growth.
Exxon Mobil Corporation is an American multinational oil and gas company. It is the world's largest publicly-traded oil company. It engages in the exploration and production of crude oil and natural gas, and manufacture of petroleum products, as well as transportation and sale of crude oil, natural gas, and petroleum products.
Despite a Q4 2011 earnings miss and disappointing production numbers, I am positive on Exxon Mobil from the long-term perspective, given its history of solid and consistent shareholder returns. Exxon is characterized by world class assets, strong cash flow generation, low leverage, low earnings volatility and leading cash distribution to its shareholders. Looking forward in 2012, it is expected to generate the highest free cash flow yield among large cap oil majors and return ~ 7% to the shareholders in the form of dividends and share buybacks.
Looking at its medium term prospects, there are some major capital projects lined up till 2015 (Kearl, Kashagan Phase I and Gorgon) which are expected to drive growth. Further, with the XTO acquisition and increased natural gas production, Exxon seems to be driving out marginal operators and consolidating the natural gas industry, rationalizing long-term production. Exxon is currently trading at a P/E slightly below its historical average and I would recommend buying the stock from medium to long term perspective.