By Guan Wang
As of March 2012, Ken Fisher is ranked the 274th richest person in the United States, with an estimated net worth of $1.7 billion, according to Forbes. Fisher wrote the "Portfolio Strategy" column for Forbes for 27 years and has published eight books about finance, four of which were New York Times bestsellers. Fisher Investments, the money management firm Fisher founded in 1979, has over $45 billion assets under management. Over the past 15 years, Fisher's stock picks have outperformed the market around 80% of the time. Recently, he released the holdings of his fund's 13F portfolio at the end of the first quarter of 2012. Let's take a closer look at Fisher's most bullish bets.
The largest non-ETF position in Fisher's portfolio at the end of March was Johnson & Johnson (JNJ). It was also the largest non-ETF position at the end of the previous quarter. At the end of the most recent quarter, Fisher owned $710 million worth of Johnson & Johnson stock. The company is very popular among hedge funds. As of Dec. 31, 2011, there were 59 hedge funds with Johnson & Johnson positions in their 13F portfolios. Legendary investor Warren Buffett was the most bullish money manager about the stock. His Berkshire Hathaway had nearly $2 billion invested in this position at the end of last year.
We like Johnson & Johnson as a dividend play. It has a decent yield of 3.78%. More importantly, the company has a low payout ratio of 64% and a stable expected earnings growth of 6%, which will allow the company to increase its dividends in the future. As a matter of fact, Johnson & Johnson has an impressive dividend paying record. It has been steadily raising its dividend payouts for 50 consecutive years.
The second-largest non-ETF position in Fisher's portfolio is Anadarko Petroleum Corporation (APC). Fisher significantly boosted his stakes in this position by 73% over the first quarter this year. At the end of March, Fisher owned $669 million worth of Anadarko shares. The company is one of the most popular energy stocks among the hedge funds we track. There were 51 hedge funds with Anadarko in their 13F portfolios at the end of last year. Billionaire John Paulson was the most bullish hedge fund manager about Anadarko. As of Dec. 31, 2011, his Paulson & Co had $731 million invested in this stock.
In early March, Anadarko announced that it had reached an agreement with Sonatrach to resolve the dispute related to the latter's implementation of Algeria's 2006 exceptional profits tax. The agreement is pending approval from the Algerian government. The decision is expected within the next four months. If approved, the agreement is expected to provide Anadarko with nearly $4.4 billion in net asset value over several years.
This probably explains the relatively high P/E ratio of Anadarko compared with its peers. Anadarko is expected to earn $3.94 this year and its forward P/E ratio is about 17.32, vs. the industry average of 12.11. Growth investors should consider the stock as its earnings are expected to roar an average of 27% annually. On the other hand, value investors many have better options. For example, Anadarko's major competitor Apache Corp (APA) has a low forward P/E ratio of 7.3 and a stable expected earnings growth rate of 7.7%.
A few other large positions in Fisher's most recent 13F portfolio include EMC Corp. (EMC), Baidu (BIDU), and Rio Tinto (RIO). Fisher had around $650 million invested in each of these positions. Rio Tinto has attractive valuation levels. Its forward P/E ratio is around 7 and it has a double-digit expected growth rate of 16.81%. However, EMC Corp.'s valuation does not look very attractive. Its forward P/E ratio is 17.88, vs. the industry average of 12.5. Despite that, as a leader in data storage industry, EMC Corp. is well positioned to benefit from the growing demand for data storage solutions. The company demonstrated robust earnings growth over the past couple of years. Its earnings grew at an average of about 15% in the past five years and are expected to continue growing at a similarly high rate over the next few years. Similarly, Baidu also has a high expected earnings growth of over 40%. Investors can gain exposure to the rapid-growing Chinese market by investing in this stock.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.