Israel Englander established his investment firm, Millennium Management, in 1989 with $35 million. The company has close to $16 billion in assets under management. The investment strategies that the firm pursues include: relative value fundamental equity, statistical arbitrage/quantitative strategies, fixed income, and merger arbitrage/event driven. The firm runs a platform model whereby teams of investors are allocated funds to purchase shares based on a variety of investment strategies. Therefore, Millennium's funds are collections of multiple portfolios. Interestingly, Millennium Management does not assess a management fee; it charges expense directly to the fund.
According to Forbes, in 2011, "Millennium International and Millennium USA returned 8.45% and 8.67% respectively net of fees." The firm "has produced annualized net returns of 15% since 1990, suffering its sole down year in 2008."
It had been reported that Englander, with a personal net worth estimated at some $2.3 billion, has sought a buyer for a minority stake in his firm. This step was viewed as an attempt to transform the company into an institutionalized business. The stake sale would broaden the firm's ownership base and would create a possibility for Englander's stake to be monetized.
Many of Millennium's largest positions are stocks from the energy sector. Some of them pay attractive dividends. Here are Englander's largest positions that pay dividends:
Williams Companies LP (WMB) was the third largest position in Englander's portfolio in the first quarter. Based on the number of shares reported in ownership in the first quarter, that stake is currently valued at nearly $79 million. This position was bolstered by 233% in the first quarter. The diversified master limited partnership (MLP) produces and processes natural gas and operates an extensive natural gas pipeline system in the U.S. It has a market capitalization of about $18 billion. The MLP has seen robust EPS growth averaging nearly 19% per year over the past five years. Analysts forecast that its EPS will grow at an average annual rate of 14.6% for the next five years.
Currently, this MLP pays cash distribution yielding 4.2% on a coverage ratio of 1.6x. The MLP is fully committed to increasing its dividend substantially in the next couple of years. Its management recently projected that it would boost its dividend each quarter in 2012 and then again in the subsequent two years. The overall increase in the payout would total 30% over the three-year period. The company's peers Kinder Morgan, Inc. (KMI), Enbridge, Inc. (ENB), and Spectra Energy Corp (SE) pay yields of 3.9%, 2.8%, and 3.8%, respectively. At the time of writing, this MLP is trading at a discount to its industry on average. Its partnership units are changing hands at $29.90 a unit, up nearly 4% over the past 12 months. The stock is also popular with billionaire Leon Cooperman.
NiSource Inc. (NI) was the eighth largest position in Englander's Millennium fund in the first quarter. Based on the number of shares reported in ownership in that quarter, the stake is presently valued at about $58 million. This position was upped by 92% in the first quarter. The company is a diversified natural gas transmission, storage, and distribution and electric power utility serving some 4 million customers in the U.S. The company's EPS contracted at a rate of 3% per year over the past five years. The EPS is forecast to expand at an average rate of 5.3% per year for the next five years. NiSource has been operating at healthy margins currently exceeding historical averages. It has tapped rich shale gas reserves in the Utica/Point Pleasant Shale formation in northeast Ohio and western Pennsylvania. For that purpose, the company has recently entered into a joint venture with Hilcorp Energy Co. The two will construct natural gas liquids gathering pipeline and processing facilities.
NiSource pays a dividend yield of 3.9% on a payout ratio of nearly 100%. Its peers Dominion Resources, Inc. (D), Duke Energy Corporation (DUK), and FirstEnergy Corp. (FE) pay yields of 3.9%, 4.6%, and 4.5%, respectively. As regards to the firm's valuation, on a forward P/E basis, the stock is trading on par with its industry. On Monday, the stock was changing hands at $25.15 a share, up 24% over the past year. Fund manager Louis Navellier (Navellier & Associates-check out its top picks) also holds a stake in the company.
Occidental Petroleum Corporation (OXY) was the eleventh largest position in Englander's first-quarter portfolio. The stake is currently valued at $45 million. The stake was reduced by 28% in the first quarter. The company is a $69 billion oil and natural gas explorer and producer, with facilities in the U.S. and internationally. Its EPS grew at 10.8% per year over the past five years; the EPS is projected to increase at a similar annual rate for the next five years. The company has solid balance sheet and fundamentals, good cash flow and rising profit margins. It also boasts a very low debt-to-equity ratio. The majority of the company's output is U.S.-based, and the company is well positioned to benefit from the U.S. oil and shale gas boom.
Occidental pays a dividend yield of 2.6% on a payout ratio of 26%. Its main competitors Exxon Mobil Corporation (XOM) and Chevron Corporation (CVX) pay yields of 2.7% and 3.4%, respectively. The stock is trading below the industry on average. Occidental shares were changing hands at $85.33 a share on Monday, down 17% from last year. Among fund managers, the stock is also popular with Ken Fisher and Rick Dillon (Diamond Hill Capital-see its top picks).
The NASDAQ OMX Group, Inc. (NDAQ) was the twelfth largest position in Millennium Management's fund in the first quarter of 2012. Currently, the position is worth some $43.5 million. The company has total market capitalization of nearly $4 billion. It is an exchange owner and operator. Its NASDAQ Stock Market LLC provides securities trading and clearing, exchange technology, securities listing, and public company services. The company offers market data products, financial indices, and other products and services. Weak economic and market conditions, poor investor sentiment, and volatility in prices of traded securities have undermined trading volumes.
The company is facing fierce competition from NYSE Euronext (NYX) and CME Group Inc. (CME), especially in the derivatives and OTC markets. The company has been seeking venues for growth through new product offerings and international acquisitions. Its EPS expanded at nearly 18% per year over the past five years. In the next five years, the EPS will grow at a rate of about 10% per year.
Nasdaq OMX Group currently pays a dividend yielding 2.4% on a payout ratio of 25%. Its peers NYSE Euronext and CME Group pay dividend yields of 4.7% and 3.4%, respectively. The company's valuation is below the industry's. The stock is was trading Monday at $22.56 a share, down 5.3% over the past 12 months. Billionaires Ken Griffin and D.E. Shaw (check top holdings) are also major investors in the company.
Sempra Energy (SRE) was the fourteenth biggest position in Englander's portfolio in the first quarter. That stake is presently valued at $57 million. The stake was upped by 708% in the first quarter. The company has a total market cap of $17 billion. It is an energy services holding company providing natural gas and electricity to some 31 million customers worldwide.
This utility is also the largest natural gas storage company in the U.S. Sempra Energy's EPS increased at an average rate of 6.1% per year over the past five years. The company is forecast to sustain a similar rate of growth in the next five years. Growth will come from capacity expansions, including international growth, especially in Latin America; higher power prices; new gas transportation pipelines; renewable energy; and natural gas terminals and liquefaction plants for international trade.
Sempra Energy pays a dividend that yields 3.5% on a payout ratio of 43%. The company's peers PG&E Corp. (PCG), Atmos Energy Corporation (ATO), and Enbridge, Inc. (ENB) pay dividend yields of 4.0%, 3.8%, and 2.8%, respectively. The company's shares are trading on par with the multi-utilities industry based on forward P/Es. Shares were changing hands at $69 on Monday, up 33% from last year and close to a new 52-week high. The stock is popular with fund manager John A. Levin (Levin Capital Strategies-check its holdings) and billionaire Cliff Asness.