- Bryant VanCronkhite, lead manager of the $5 billion Wells Fargo Special Mid Cap Value fund (MUTF:WFPCX), aims to get an edge by buying companies with strong balance sheets, but only when Wall Street is mispricing their stock.
- Among the 60-odd holdings in his fund, he highlights private-label food maker TreeHouse Foods (NYSE:THS), communications outfit Harris (NYSE:HRS), fast-food chain Wendy’s (NYSE:WEN), transaction processor DST Systems (NYSE:DST), and set-top box maker Arris International (NASDAQ:ARRS).
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THS: He expects TreeHouse to throw off $500M-plus in free cash flow over the next five years from $213M last year. Says it's, “Wildly attractive in the consumer-staples space.”
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HRS: Became interesting when CEO Bill Brown took the helm in 2011. He bought rival Exelis for $4.6B and cleaned house. VanCronkhite expects the company’s more-concentrated portfolio of assets to produce higher levels of cash flow over the next three to five years. Notes that Jana Partners acquired two board seats in August, increasing the likelihood of even more value creation. At $89, its shares yield 2.4%.
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WEN: “Everyone knows Wendy’s products, but I don’t think the market prices in the way the business is run.” Management is on a “multiyear, multipronged” program to raise shareholder value, and has almost completed its move to a 95% franchise-owned model.
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DST: “DST rejuvenated their business model under a wealth and health platform.” Over the long term, he expects DST’s investments in technology to pay off. Expects FCF to more than double over the next five years.
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ARRS: The TV set-top-box maker’s customers are some of the biggest names in cable, such as Comcast and Charter Communications. And they’re incentivized to be good customers. “They have access to buy Arris stock at a specific price based on how much revenue they bring in. Says FCC fears are overblown.
- Source: Barron's