By Aubrey Tabuga
Todd Veredus is one of the largest asset management companies in the market. It currently has over $3 billion worth of assets under its management. As of the end of September 2012, it has acquired 53 new stocks and sold out 69 based on whalewisdom.com. The asset management company's portfolio is heavy on these sectors - financial (19.79%), technology (19.21%), services (16.04%), energy (10.82%), and healthcare (8.69%).
% of Portfolio
Wells Fargo & Company
Source: whalewisdom.com & finviz.com; data as of Nov. 5, 2012
Wells Fargo & Company
Wells Fargo & Company is the fourth-largest bank in terms of assets in the US. It provides retail, commercial, and corporate banking services. As of the middle of this year, it has over 6, 300 branches. The San Francisco-based company is aiming to expand its investment banking and capital markets business through its Wells Fargo Securities division. It expects that, with this expansion, the unit will contribute roughly 10% of WFC's total revenue.
The asset manager bought 1.327 million shares of Wells Fargo in the third quarter. This is equivalent to 1.46% of its total portfolio. The last time that WFC made it to the 13F filing of Todd Veredus was in the third quarter of 2010 when it sold all its shares in the financial firm.
Wells Fargo is a profit-generating engine with a net margin of 21.54%. Earnings are in an upward course. The long term annual growth estimate is 8.74%. Within the past five years, sales grew annually at a rate of 8.92%. Its year-to-date performance has improved by 24.92%.
GE, the technology innovator, is also Todd Veredus' top buy for the third quarter. Aside from its household appliances, transportation, healthcare, and aviation products, GE is also into the financing business. GE's lending arm GE Capital is set to purchase 7.69% of Biocon's Research Unit Syngene. Syngene is a provider of discovery and development services to pharmaceutical companies like Abbott and Bristol-Myers Squibb and Biocon is India's biggest biotechnology company by revenue.
The fund manager has increased its holdings in GE by 86% by the end of September 2012. The technology company now forms 1.42% of the asset management firm's portfolio. This is the biggest position that Todd Veredus has acquired so far in at least the couple of years that passed. It is noted that the fund has significantly increased its shares in GE during the first quarter of 2012.
Although the stock performance has been bland recently, the long-term prospects are still encouraging. GE's annual growth estimate for the next five years is a double-digit 11.19%. The stock's year-to-date performance has improved by 21.98%. GE's is also favored by Columbus Circle Investors.
EMC is a world leader in data storage devices. It has a market share of about 30%. The company continues to lead with its new technological offering via VMware VPLEX, which has achieved enhanced and simplified data mobility, and enhanced network availability and utilization.
Todd Veredus has initiated its position in the Hopkinton-based company in the third quarter. The company was last seen in the fund manager's 13F filing in the second quarter of 2011 when it sold all its 115,100 shares. The purchase of new 770,178 shares as of the end of September is the firm's largest activity on EMC in the past couple of years. The data storage company currently comprises 0.67% of the asset manager's portfolio.
The stock's year-to-date performance is up by 15.97%. The earnings potential within the next five years is high at an estimated annual rate of 13.98%. EMC is said to have been heavily reliant on VMware for its growth. The sales have grown by 12.39% per year during the last five years.
Walgreen operates one of the largest drugstore chains in the U.S. It provides consumer goods and services, health and wellness, and pharmacy services. As of the end of October, the Deerfield-based company operates 7,944 drugstores in and outside of the U.S. Recently, Walgreen has formally set a new joint venture called Walgreens Boots Alliance Development GmbH with Alliance Boots. This new company is based in Bern, Switzerland. The strategic partnership commenced in June this year when Walgreen bought a 45% stake in Alliance Boots. Walgreen is said to be expanding and diversifying its market as a hedge against new laws in healthcare in the U.S.
Todd Veredus increased its position in Walgreen by tenfold by purchasing about 622,000 shares as of end September. This amounts to $24.7 million and is by far the biggest holding that the asset manager has had in the drugstore company in at least 9 consecutive quarters. WAG is not only one of Veredus' biggest buys but also one of its top dividend stocks with a yield of 3.15%. Its potential earnings growth is remarkable with an estimated annual increase of 12.77% in the next 5 years. So far, the stock year-to-date performance has improved by 7.78%.
Phillips 66 engages in refining and marketing crude oil and petroleum products; and operates in the U.S., Europe, and Asia. It also has midstream and chemicals businesses. Todd Veredus has bought 139% additional shares in the energy company during the third quarter. The asset manager now owns $39.4 million worth of PSX shares or 1.25% of its total portfolio. This is just the second time in at least 9 quarters that the company appeared in the fund manager's 13F filing. It can be recalled that Todd Veredus initiated its position just in the second quarter.
The stock's performance is in an uphill climb. The growth in the year-to-date performance of the stock is notable at 37.41%. The EPS growth this year is five-fold. However, the estimated EPS for next year is quite low at 7.30 compared with the current year's 7.68. Although the estimated EPS growth next year is -18.4%, it is anticipated to grow at an annual rate of 7.15% in the next five years. Moreover, the company has a rather healthy P/E ratio of 6.02.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: EfsInvestment is a team of analysts. This article was written by Aubrey Tabuga, one of our equity researchers. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.