Ole Andreas Halvorsen is one of the most successful protégés of hedge fund legend Julian Robertson of Tiger Management. Halvorsen worked at Tiger Management for seven years as senior managing director and the director of equities. In 1999, with former colleagues David Ott and Brian Olson, Norwegian-born Halvorsen founded Viking Global Investors. The fund is a long/short global equity fund.
With both Ott and Olson gone from Viking Global, Halvorsen serves as Chief Investment Officer. His $16.7 billion fund netted a 7.6% return last year and 18.2% annually since inception. The return last year beat most of the industry players, which, on average, dropped 5%. In the first quarter of this year, Viking Global rose 5.4%, about on par with the industry's 5% return. Last year, the fund shut its doors to new money.
Here is a quick overview of Andreas Halvorsen's five largest positions that pay dividends:
Cisco Systems' (CSCO) share in the Viking Global portfolio is valued at $683 million, as of the end of the first quarter of 2012. The stake was upped by 335% in the same quarter. The company is a $91 billion network equipment giant that pays a dividend yield of 1.9% on a low payout ratio of 24%. Its peer Hewlett-Packard (HPQ) pays a dividend yield of 2.6%, while competitors Alcatel-Lucent (ALU) and Juniper Networks (JNPR) do not pay any dividends. The company is expected to grow its EPS 10% a year for the next five years, almost double the average growth rate realized over the past half decade. However, the expected growth rate could moderate given the increasingly difficult operating environment, especially in Europe. Still, Cisco Systems will be able to sustain its free cash flow above $1 billion, despite the weakening outlook. This may suggest solid dividend increases in the future. The stock is changing hands at $17 a share, down 8.7% year-to-date. The stock is quite undervalued relative to peers and the company's own historical metrics. Fund manager Jean-Marie Eveillard (First Eagle Investment Management - see its top picks) and billionaire Donald Yacktman are also fans of the stock.
Invesco Ltd.'s (IVZ) share in Halvorsen's fund is valued at $663 million as of the end of the quarter ended March 31. The stake was slightly reduced in the quarter, by 5%. Invesco is a $9.5 billion independent investment management company. The stock of this asset manager pays a dividend yield of 3.2% on a payout ratio of 43%. The company's peers, including Legg Mason (LM), T. Rowe Price Group (TROW), and BlackRock, Inc. (BLK), yield 1.7%, 2.2%, and 3.5%, respectively. Invesco saw its EPS grow at an average annual rate of 6% per year over the past five years. For the next five years, the company is expected to boost its EPS at an average rate of 13.3% per year. Growth will be bolstered by improving long-term investment performance, driven by a recovery in the global equity markets. Invesco's cost control initiatives will also help boost EPS performance. Improved global investment flows amid its broad diversification will likewise contribute to growth. The stock is trading at $21.21 a share, up 3% year-to-date. As regards the company's valuation, the stock is undervalued relative to its industry and the company's own historical metrics. Recently, one of Invesco's Directors, Rex D. Adams, purchased 1,333 shares of IVZ at a price of $21.76 per share. Billionaire Ken Griffin (Citadel Investment Group - check out its holdings) is a major investor in the company.
LyondellBasell Industries' (LYB) share in the Viking Global portfolio is valued at more than $621 million. The company is a $23 billion chemical producer, the world's third largest independent chemical company. LyondellBasell Industries pays a dividend yield of 4.0% on a payout ratio of 44%. Its peers Cabot Corporation (CBT) and Huntsman Corporation (HUN) pay dividend yields of 2.1% and 3.1%, respectively. Kraton Performance Polymers (KRA) and American Pacific Corporation (APFC) do not pay dividends. The company is expected to grow its EPS at an average rate of 13.2% per year for the next half decade. The forecast, however, is based on the expectation of a robust demand in the industrial sector. LyondellBasell Industries' shares are changing hands at $39.1 a share, up almost 17% year-to-date. The company is trading at eight times its forward earnings, on par with its industry. Fund manager John Burbank (Passport Capital - see its top picks) is also bullish about the stock.
H&R Block's (HRB) share in the Viking Global portfolio is valued at $390 million. The company is a $4.5 billion business that engages in tax preparation, retail banking, and various business consulting services. H&R Block prepares some 14% of all tax returns in the U.S. The company pays a dividend yield of 5.2% on a payout ratio of 72%. The company's rival Intuit Inc. (INTU) pays a dividend yield of 1.0%. H&R Block reported a slew of bad news recently, announcing, inter alia, the payment of $28.2 million to settle legal issues with the Securities and Exchange Commission and the closure of 200 underperforming offices across the U.S. The company also guided lower for fiscal 2012, projecting total annual revenues at $2.9 billion (vs. $3.0 billion expected by analysts) and EPS between $1.09 and $1.15 per share (vs. $1.39 per share expected by analysts). A poor employment market is a major negative factor influencing H&R Block's performance. Competition for self-service and online filing is also stiff. Still, expecting a return to solid employment growth, analysts expect the company to grow its EPS at an 11% per year rate for the next five years. The shares are changing hands at $15.21 a share, down 6.3% from the beginning of the year. As regards the valuation, on a forward P/E basis, the stock is trading below peers on average. Donald Yachtman and Lee Ainslee (Maverick Capital - check out its top holdings) are also bullish about the stock.
Wynn Resorts' (WYNN) share in Halvorsen's fund is valued at more than $307 million. This $11.5 billion casino resorts operator with facilities in Las Vegas, U.S., and Macao, China, pays a dividend yield of 1.9% on a payout ratio of 42%. The company's rival Las Vegas Sands Corp. (LVS) pays a dividend yield of 2.2%, while competitor MGM Resorts International (MGM) does not pay any regular dividends. The company is seeing robust revenue and EPS growth, fueled by spectacular demand in Macao, special administrative region of China. The company's Macao assets are a play on East Asia's (and particularly China's) wealth and discretionary income growth amid rising middle class. This could pay tremendously in the future; however, a high dependence on China revenues could also backfire in case of a notable slowdown or recession in China. Wynn Resorts' EPS is expected to grow at a 16.1% rate per year for the next five years. The company's stock is trading at $102 a share, down 7.6% year-to-date. Its forward P/E is above the industry's average ratio. Recently, there has been some insider selling of the stock. Fund manager John Burbank and Stephen Mandel (Lone Pine Capital - see its top holdings) are investors in the company.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.