Janus Capital's High Conviction Q4 Undervalued Buys And Sells In Its $86 Billion 13-F Portfolio

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Includes: BHI, EA, EOG, GFI, HAL, JNS, MGM, MOS, NBR, PXD, TXN, UNH, WBA, YOKU
by: GuruFundPicks

Denver, CO-based investment firm Janus Capital Group (NYSE:JNS), established in 1969, is among the largest investment managers, with over $148 billion in assets under management , including $86.0 billion in its latest 13-F filed for Q4. Besides its Denver HQ, Janus also has additional offices in the U.S., and also worldwide in London, Milan, Tokyo and Hong Kong. Janus offers equity, fixed income, money market and balanced mutual fund products, and it provides its services to investment companies, retail investors, institutions and individuals.

The firm employs a bottom-up research approach to select its investments, and it also offers access to mathematical investing via its subsidiary INTECH, and to value investing via its subsidiary Perkins. The fund holds a diversified portfolio of over 900 equity positions, about two-thirds of which are in large-caps, another quarter is in mid-caps, and small-caps account for the remaining 5%-10%.

We analyzed Janus'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):

UnitedHealth Group Inc. (NYSE:UNH): UnitedHealth is a diversified health and well-being company, serving more than 70 million Americans. Janus added $92 million in Q4 to its $134 million prior quarter position. Other major institutional investors with large bullish bets on UNH in Q4 include JPMorgan Chase adding 4.0 million shares to its 18.7 million share prior quarter position, and Oppenheimer Funds adding 1.6 million shares to its 0.2 million share prior quarter position. UNH stock currently trades at a 10 forward P/E and 2.0 P/B compared to averages of 10.5 and 2.0 for its peers in the HMO group. The company is an outperformer in the group, posting a good Q4 in January that handily beat analyst earnings estimates ($1.17 v/s $1.04) and reaffirmed forward guidance, and its shares currently trade near four-year highs.

Electronic Arts Inc. (NASDAQ:EA): EA is a developer of video game software and content for play on video game consoles, PCs, handheld platforms, mobile phones and the Internet. Janus added $66 million in Q4 to its $35 million prior quarter position. Other major institutional investors with large bullish bets on EA in Q4 include mutual fund powerhouse Fidelity Investments adding 12.0 million shares to its 3.1 million share prior quarter position, and hedge fund Carlson Capital adding a new 1.3 million share position.

EA in its most recent Q3 (ending December) reported at the beginning of February beat analyst revenue and earnings estimates, but guided down on both revenue and earnings for its Q4 (ending March). Its shares have dropped off significantly since the Q3 report, and currently trade near ten-year lows at 14-15 forward P/E and 2.5 P/B compared to averages of 54.5 and 2.1 for its peers in the toys, games and hobby group.

EOG Resources (NYSE:EOG): EOG is engaged in the production and marketing of crude oil and natural gas in the U.S., Canada, Trinidad, U.K. and China. Janus added $53 million in Q4 to its $206 million prior quarter position. Other major institutional investors with large bullish bets on EOG in Q4 include mutual fund powerhouse Fidelity Investments adding 3.3 million shares to its 3.7 million share prior quarter position, and Ken Griffin's hedge fund Citadel Advisors adding 2.0 million shares to its 0.1 million share prior quarter position. EOG trades at 16-17 forward P/E and 2.5 P/B compared to averages of 19.8 and 5.3 for its peers in the U.S. oil & gas exploration and production group.

Nabors Industries Ltd. (NYSE:NBR): NBR is a provider of oil, gas, geothermal and land drilling, land well and work-over services worldwide. Janus added $46 million in Q4 to its $141 million prior quarter position. Other major institutional investors with large bullish bets on NBR in Q4 include Ameriprise Financial adding 2.3 million shares to its 2.9 million share prior quarter position, and basic materials-focused Van Eck Associates adding an almost new 1.1 million share position. NBR shares currently trade at 7-8 forward P/E and 1.1 P/B compared to averages of 11.2 and 1.3 for its peers in the oil & gas drilling group.

Other high conviction buys by Janus in Q4 include (see Table):

  • MGM Resorts International (NYSE:MGM), that owns and operates casino resorts in the U.S., and offers gaming, hotel, dining entertainment, retail and other resort amenities at its casinos, in which it added $214 million to its $446 million prior quarter position; and
  • Youku.com Inc. (NYSE:YOKU), China's largest video-streaming company, also more popularly known as the YouTube of China, that offers mostly professionally-generated content licensed from movie studios and TV companies, in which it added $77 million to its $106 million prior quarter position.

The following are Janus's high conviction bearish picks based on its Q4 selling activity (see Table):

  • Halliburton Company (NYSE:HAL), that 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, in which it cut $325 million from its $715 million prior quarter position;
  • drug store retail chain operator Walgreen Company (WAG), in which it cut $250 million from its $561 million prior quarter position;
  • Texas Instruments (NYSE:TXN), a global manufacturer of analog ICs and digital signal processors used in cell phones, navigation systems and PCs, in which it cut $210 million from its $398 million prior quarter position;
  • Baker Hughes Inc. (NYSE:BHI), a provider of wellbore products and technology services and systems for drilling, formation evaluation, completion and production, and reservoir technology and consulting to the global oil and natural gas industry, in which it cut $181 million from its $692 million prior quarter position;
  • Pioneer Natural Resources (NYSE:PXD), engaged in the exploration and production oil and gas in the U.S. and South Africa, in which it cut $155 million from its $275 million prior quarter position;
  • Mosaic Inc. (NYSE:MOS), one of the world's leading producers and marketers of concentrated phosphate and potash crop nutrients for the global agriculture industry, in which it cut $89 million from its $185 million prior quarter position; and
  • Gold Fields Ltd. (NYSE:GFI), a South African mining company engaged in the exploration and extraction of gold in South Africa, Ghana, Australia and Peru, in which it cut out completely its $58 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 have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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