Atlanta-based Invesco Ltd. (NYSE:IVZ) is a global independent investment management company, with over $650 billion in assets under management, including $174.4 billion in 13-F assets at the end of Q4. Founded in 1935, it has over 600 investment professionals and serves individuals, typically high net worth individuals, via branch offices in over 20 countries. It operates under the brand names Invesco, Trimark, Invesco Perpetual, Atlantic Trust, WL Ross and Powershares.
Invesco's equity investments are in core, growth, and value stocks of small-cap, mid-cap and large-cap companies, and it employs a fundamental and quantitative analysis with a bottom-up stock picking approach to make its investments. Their 13-F portfolio is well-diversified into over 4,200 positions across all industries, with over two-thirds of its holdings in large-caps, another quarter in mid-caps, and the remaining 10% or so in small-cap equities.
We analyzed INVESCO's equity holdings in its Q4 13-F to determine its highest conviction bets, selecting the largest buys and sells in size, where the buy/sell is also a significant proportion of its prior quarter position in that company. Based on that analysis, the following are its high conviction bullish positions, that are also trading at a discount to the peers in their group (see Table):
LSI Corp. (NASDAQ:LSI): LSI is a designer of complex high-performance ICs and storage systems. Its silicon-to-systems solutions are at the heart of products that create, store, consume and transport digital information. Its ICs are used in hard disk and solid state drives, high-speed communications and storage systems, computer servers and PCs. Invesco added $73 million in Q4 to its $55 million prior quarter position. Other major institutional investors with large bullish bets on LSI in Q4 include Ken Griffin's CItadel adding 21.1 million shares to its 0.2 million share prior quarter position, and mega fund Bank of New York Mellon Corp. adding 4.7 million shares to its 9.5 million share prior quarter position.
LSI last Wednesday raised Q1 revenue and earnings guidance ($585-$615 million and 12c-16c v/s prior guidance of $550-$590 million and 9c-15c), aided by better than expected strength in the hard disk drive market and its flash-based products. The shares have rallied to near five-year highs, and currently trade at 11 forward P/E and 4.8 P/B compared to averages of 17.4 and 1.9 for its peers in the electronic components semiconductor group.
Halliburton Company (NYSE:HAL): HAL provides a variety of equipment, and maintenance, engineering and construction services to the oil and gas exploration and production (E&P) industry, including reservoir completion and drilling services. Invesco added a $161 million in Q4 to its $605 million prior quarter position. Other major institutional investors with large bullish bets on HAL in Q4 include JP Morgan adding 5.9 million shares to its 4.2 million share prior quarter position, and basic materials-focused Van Eck Associates adding 4.6 million shares to its 5.8 million share prior quarter position.
HAL is undervalued, trading at 7-8 forward P/E and 2.4 P/B compared to averages of 14.2 and 3.3 for its peers in the oil field services group, while earnings are projected to increase at a compound 16.3% annualized rate from $3.35 in 2011 to $4.53 in 2013.
Talisman Energy (NYSE:TLM): TLM is a Canadian company engaged in oil, natural gas liquids and natural gas exploration and production internationally. Invesco added $62 million in Q4 to its $144 million prior quarter position. Other major institutional investors with large bullish bets on TLM in Q4 include mutual fund company RS Investment Management adding 14.4 million shares to its 7.2 million share prior quarter position, and mega fund Wellington Management adding 8.1 million shares to its 4.5 million share prior quarter position.
TLM shares have been almost slashed in half from its $25 highs about a year ago, and it trades at 10-11 forward P/E and 1.4 P/B compared to averages of 19.3 and 1.5 for its peers in the Canadian oil & gas exploration & production group.
Other high conviction buys by Invesco in Q4 include (see Table):
- Netapp Inc. (NASDAQ:NTAP), a manufacturer of integrated network storage and data management hardware for corporations and government agencies, in which it added $178 million to its $174 million prior quarter position;
- Michael Kors Holdings Ltd. (NYSE:KORS), a luxury lifestyle brand that markets accessories, footwear and apparel in 74 countries via a global distribution network that includes company-operated retail stores, leading department stores, specialty stores and select licensing partners, in which it added a new $143 million position;
- Transocean Ltd. (NYSE:RIG), a provider of offshore contract drilling for oil and gas wells worldwide, in which it added $77 million to its $5 million prior quarter position; and
- DCT Industrial Trust Inc. (NYSE:DCT), a publicly owned REIT that owns, acquires, develops and manages high-quality bulk distribution and light industrial properties in high volume distribution markets in the U.S. and Mexico, in which it added $27 million to its $60 million prior quarter position.
The following are Invesco's high conviction bearish picks based on their Q4 selling activity (see Table):
- Atmel Corp. (NASDAQ:ATML), a manufacturer of a wide range of highly integrated semiconductor integrated circuit products, including microcontrollers, application specific ICs, non-volatile memory, and RF components, in which it cut $129 million from its $130 million prior quarter position;
- Regions Financial Corp. (NYSE:RF), a holding company for Regions Bank that provides a range of commercial, retail and mortgage banking services in the U.S. via 1,772 offices in 16 states in the South and the Midwest, in which it cut $111 million from its $125 million prior quarter position;
- Valero Energy Corp. (NYSE:VLO), an independent petroleum refining and marketing company operating through three segments: refining, retail and ethanol, in which it cut $89 million from its $336 million prior quarter position;
- Boston Scientific Corp. (NYSE:BSX), a developer of medical devices used in cardiology, endoscopy, oncology, neuromodulation and other interventional procedures, in which it cut $84 million from its $204 million prior quarter position;
- Molycorp Inc. (NYSE:MCP), engaged in the mining and processing of rare earth ores at the mountain pass facility near the CA/NV border, in which it cut $61 million from its $66 million prior quarter position; and
- Hollyfrontier Corp. (NYSE:HFC), an independent petroleum refiner and marketer in the U.S., that is engaged in the production of high value light petroleum products such as gasoline, diesel fuel, jet fuel, and other specialty products, in which it cut $59 million from its $70 million prior quarter position.
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Credit: Historical fundamentals including operating metrics and stock ownership information were derived using SEC filings data, Zacks Investment Research, Thomson Reuters and Briefing.com. The information and data is believed to be accurate, but no guarantees or representations are made.
Disclosure: I am long MCP.
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