Seeing as money managers reported their latest holdings (as of Q4 2011) a few weeks ago, I thought this might serve as an interesting basis for a stock screen. Readers will note I regularly follow a handful of managers such as Seth Klarman and Bruce Berkowitz but I wanted to go beyond my favorite value investors. Using Morningstar's screener, I fished out stocks owned by at least 10 top mutual funds, as defined by a current Morningstar rating of 4+ stars. I refined the list further by requiring the stocks be traded on a major exchange, have at least $1B in market cap and yield more than the average S&P 500 stock. 12 names made the list:
|TICKER||COMPANY||Current Price||Yield||PE||EV / EBITDA||Debt to EBITDA|
|IBA||Industrias Bachoco SAB SA de CV||$20.57||0.515 (2.49%) ex-div:" 8-Jul-11"||106.2||17.0||2.6|
|CVE||Cenovus Energy Inc||$38.55||0.807 (2.09%) ex-div:"Dec 13"||19.8||9.2||1.5|
|CHT||Chunghwa Telecom Co Ltd||$29.78||1.91 (6.41%) ex-div:"19-Jul-11"||14.6||7.1||0.0|
|CLX||The Clorox Co||$67.57||2.35 (3.49%) ex-div:"Jan 24"||16.4||10.5||2.7|
|DEO||Diageo PLC||$95.30||2.627 (2.77%) ex-div:"Sep 7"||22.5||15.0||3.1|
|ECA||Encana Corp||$19.83||0.80 (4.04%) ex-div:"Dec 13"||116.4||4.0||1.6|
|NRP||Natural Resource Partners LP||$24.90||2.18 (8.74%) ex-div:"Feb 1"||50.0||10.0||2.6|
|RYAAY||Ryanair Holdings PLC||$33.62||N/A||14.1||8.1||3.6|
|SKM||SK Telecom Co Ltd||$14.30||N/A||6.3||3.0||N/A|
|TCP||TC Pipelines LP||$46.50||3.06 (6.56%) ex-div:"Jan 27"||15.4||16.0||3.7|
|TOT||Total SA||$56.09||3.204 (5.70%) ex-div:"Dec 14"||7.7||3.2||1.1|
|UL||Unilever PLC||$32.46||1.252 (3.85%) ex-div:"Feb 15"||16.6||9.4||1.7|
Readers can view more detailed financial data, including my quick estimated fair value, in spreadsheet format here.
A couple points should be noted about this screen. First, Morningstar's fund ratings are based on current performance and are not necessarily indicative of long-term performance. Reversion to the mean is a powerful factor in investment returns, especially when it pertains to mutual funds. Second, these holdings are not necessarily new buys in the quarter but simply the stocks most held by Morningstar's highest rated funds. These names could have powered the funds' current returns in the last year or so that led to 4-5 star status and may no longer be good opportunities. As the Dow closed above 13,000 today, one might expect bargains to be harder to come by. My quick valuation work did not reveal any compelling opportunities, with perhaps the exception of Cenovus Energy, which looks slightly undervalued based on the value of its energy assets.
Industrias Bachoco SAB. de CV is a Mexico-based holding company primarily engaged in the poultry production. Its main product lines include chickens, table eggs, balanced feed, swines and others, such as poultry-related products, as well as turkey and beef value-added products. IBA generated returns of 4% ROE and 3% ROI vs the industry's 1% ROE and ROI.
Cenovus Energy Inc. is an oil company primarily focused on bitumen production that was spun out of Encana, which also made this list. The Company's operations include oil sands properties and established crude oil and natural gas production in Alberta and Saskatchewan. CVE beat the industry with ROE of 16% vs 12% but ROI at 8% lagged peers' 11%.
Chunghwa Telecom Co., Ltd. is a telecommunications service provider in Taiwan. The Company has five segments: domestic fixed communications business, mobile communications business, Internet business, international fixed communications business and others. CHT has generated attractive returns: 13% ROE and ROI vs. industry's 7% and 5%, respectively.
The Clorox Company is a manufacturer and marketer of consumer and institutional products. Clorox sells its products primarily through mass merchandisers, grocery stores and other retail outlets. CLX is a cash cow, delivering ROI of 19%, handily outperforming the industry average of 1%.
Diageo plc is engaged in the drinks business with a collection of international brands. Diageo is a participant in the branded beverage alcohol industry and operates worldwide. Diageo produces and distributes a collection of branded premium spirits, beer and wine. The sin industries are generally regarded as recession-resistant, an assumption supported by DEO's returns 33% ROE and 12% ROI vs. peers' 10% ROE and 5% ROI.
EnCana Corporation is a natural gas producing company. The Company operates in two divisions: Canadian Division and USA Division. EnCana's operations are focused on exploiting North American natural gas formations, including tight gas, shales and coal bed methane. ECA's returns of 1% ROE and less than half a percent ROI badly lag the industry's 12% and 11%, respectively.
Natural Resource Partners L.P. is a limited partnership engaged principally in the business of owning, managing and leasing mineral properties in the United States. It owns coal reserves in the three United States coal-producing regions: Appalachia, the Illinois Basin and the Western United States. Returns of 7% ROE and 3% ROI beats industry averages of 1% ROE and <1% ROI.
Ryanair operates a low-fares, scheduled-passenger airline serving short-haul, point-to-point routes between Ireland, the United Kingdom, Continental Europe, and Morocco. While returns of 17% ROE and 8% ROI (vs peers' 7% and 3%) suggests the company may be a good player in its industry, I have virtually zero interest in buying an airline stock.
SK Telecom Co., Ltd. is a Korean wireless telecommunications services provider. The largest player in its home country, SKM delivered 24% ROE and 15% ROI, beating peers' 9% ROE and 7% ROI.
TC PipeLines, LP acquires, owns and participates in the management of energy infrastructure businesses in North America. Judging from its returns, TCP is a strong operator in the field, with 13% ROE and 8% ROI beating peers' 4-5% figures.
TOTAL SA is a France-based integrated international oil and gas company. With operations in more than 130 countries, TOTAL engages in all aspects of the petroleum industry. While the company has experienced some efficiency issues, its returns of 19% ROE and 12% ROI are still higher than the industry's 12% ROE and 9% ROI. I have made the bullish case for TOT in the past and remain positive on the stock.
Unilever PLC is a supplier of fast moving consumer goods with operations in more than 100 countries and sales in 180. While return figures are unavailable, UL is a consistent money-maker, averaging over 3B euros in free cash flow annually over the last 5 years. As such, stock prices reflect a premium usually accorded to companies with such steady market share.
Disclosure: I am long TOT.