Boykin Curry's Eagle Capital Management, not to be confused with Eagle Value Partners, has generated a cumulative return of 2,031% since its inception where S&P 500 and Russell 1000 returned 634% and 687% respectively during the same time period. Curry's strategy is value-based long-term focused. This is the second part of our article discussing Eagle Capital's top stock picks (read first part here). Here are their top 10 long positions at the end of March:
LIBERTY GLOBAL INC
WAL MART STORES INC
COMCAST CORP NEW
COCA COLA CO
UNITEDHEALTH GROUP INC
Coca-Cola has some short-term headwinds to work through, but the long-term thesis is intact with strong fundamentals, growth in emerging markets, potential ROIC boost from bottler divestitures, reasonable valuation, and a great-looking balance sheet. Sales in China and Europe have taken a downturn, whilst North American, Brazilian, and Russian markets has shown an uptick; late snow in Germany and rising taxes in France have contributed the weak European performance. As a result volumes should drop but pricing should remain stable. After the Nestea breakup, KO is looking to fill the ready-to-mix hole in the US. Fuze and Gold Peak are currently covering that area but as for the rumors regarding KO's purchase of Monster (MNST), management called that "irresponsible journalism from uninformed sources." So it's a no-go for now on Monster, but a tack-on acquisition of the likes of Arizona Tea may be on the horizon. We think KO can trade up to $80 through the year.
Ecolab is a water, hygiene and energy technologies company. Q1 earnings were pretty good, beating estimates. Cleaning & Sanitizing pro forma sales went up by 3% y-o-y on strength in Latin America, and Global Energy pro forma sales increased an impressive by 29%. Q2 guidance included sales increases of 6% to 9% and adjusted EPS of $0.69 to $0.72. US Cleaning & Sanitizing sales were up 7% y-o-y, International Organic growth in 2012 will be supplemented by an estimated $0.19/share accretion from the Nalco acquisition. ECL has a decent growth outlook, but we think this is already priced in. And now that debt repayment seems to be more of a focus in 2013 versus share repurchases, we see limited upside.
Praxair , formerly a part of Union Carbide, is the largest industrial gas company in North and South America and the third largest in the world, supplying air separation systems and high-performance surface coatings. For Q1, North America and Europe led sales growth up 6% and 9%, respectively. Surprisingly South America was only up 1%, which we attribute to foreign exchange fluctuations. Overall end-market sales showed strength in energy (up 17%) and aerospace (up 9%) and weakness in the electronics business (down 6%). Trading at less than 19.0x 2012 P/E, we think PX is fairly valued. If the company is able to demonstrate growth in the hydrogen deal backlog and increases in utilization rates, we think there could be a bit more upside.
UnitedHealth , held by Paul Reeder, Leighton Welch, and Bernard Horn is the largest health services company in the US with annual revenues set to top $100 billion this year and owns the third largest pharmacy benefit manager, Optum. UNH is particularly strong in Medicare Advantage, Medicare Supplement, Medicare PDP, and Medicaid managed care (the latter two through Optum). We believe UNH is well-positioned relative to its peers to benefit from the changing healthcare landscape. It's had a strong start to 2012 with the TRICARE West win and has added ~895k lives across the commercial segment, Medicare Advantage, and Medicaid. Additionally, we see significant growth potential in the Medicare and Medicaid segments with dual eligible being an interesting space; UNH is currently the market leader in Medicare Advantage enrollment. And from an M&A perspective, management indicates that it sees opportunities for consolidation in both health benefits and health services. Within Optum alone, FontierMEDEX, Logistics Health, and Connextions, have been contributing to growth. We are very positive on UNH.
Disclosure: I am long MSFT.