Analyzing BlackRock's 5 Top Sells

Includes: GE, IBM, MSI, RDC, WMB
by: Rash Menaria

BlackRock Financial Management, Inc. (NYSE:BLK) is an investment advisory and hedge fund firm founded by Robert S. Kapito. The firm caters to high net-worth individuals, banking or thrift institutions, pension and profit sharing plans, charitable organizations and corporations and manages over $150 billion in assets.

The following is a list of its top 15 sells in the last quarter, as released in BlackRock's most recent 13F filing with the SEC.



Shares Held - 12/31/2010

Shares Held - 03/31/2011

Motorola Solutions Inc




International Business Machines




Williams Companies Inc




General Electric Co




Rowan Companies Inc




SanDisk Corp




Intel Corporation




Gap Inc




AT&T Inc




International Paper Co




News Corp




Genworth Financial Inc




Morgan Stanley




Exxon Mobil Corp




Covidien Plc




Here is my take on BlackRock’s top five sells:

Motorola Solution Inc, a manufacturer of two-way radios, wireless network security products, and voice and data communications systems

My Take: Buy

MSI’s first quarter earnings results showed that net sales grew 8 percent from first-quarter 2010, to $1.9 billion. Government sales increased to $1.2 billion, up 5 percent from first-quarter 2010. Enterprise sales increased to 14 percent from first-quarter 2010, to $695 million. During the first quarter of 2011, Motorola Solutions generated $231 million of cash from operations compared with $59 million in the year-ago quarter. Motorola Solutions expects its revenue to grow by 4%-4.5% year over year. Motorola Solutions commands nearly half of the total public safety market in the U.S. The company is the largest manufacturer of barcode readers and small rugged mobile computers.

Motorola is shifting its focus towards international operations to increase its market share, as the competition in North America remains particularly difficult. The company is also expanding relationships with other wireless carriers in an attempt to reduce dependence on Verizon (NYSE:VZ).

International Business Machines Corporation (NYSE:IBM) provides information technology products and services worldwide. IBM is one of the biggest IT services companies in the world. IBM is headquartered in Armonk, New York, United States and has about 390,000 employees.

My Take: Buy

First-quarter net income was $2.9 billion compared with $2.6 billion in the first quarter of 2010, an increase of 10 percent. Operating (non-GAAP) net income was $3.0 billion compared with $2.6 billion in the first quarter of 2010, an increase of 13 percent. IBM raised its expectations for full-year 2011 GAAP diluted earnings per share to at least $12.73 from at least $12.56; and operating (non-GAAP) diluted earnings per share to at least $13.15 from at least $13.00.

The new products in the areas of Business Analytics, cloud computing, “smarter planet” concept, and the growth in emerging markets will be the drivers for IBM’s growth. “Smarter planet” in a nutshell, is looking at data and gaining insights from the data. The potential is huge, considering the amount of data that is collected in the present.

Williams Companies Inc (NYSE:WMB) An integrated natural gas company, Williams produces, gathers, processes and transports clean-burning natural gas to heat homes and power electric generation across the country. It operates approximately 14,600 miles of interstate natural gas pipeline. It has 4.5 trillion cubic feet equivalent of natural gas reserves in the United States and abroad. The company divides its business into four segments: Exploration & Production, Williams Partners – that includes the company’s 84%-owned master limited partnership Williams Partners L.P. (NYSE: WPZ) – Midstream Canada & Olefins, and Other.

My Take: Buy

WMB announced unaudited net income attributable, for first-quarter 2011 of $321 million, or $0.54 per share on a diluted basis, compared with a net loss of $193 million, or a loss of $0.33 per share on a diluted basis for first-quarter 2010. Earnings guidance for 2011-12 has been increased 11 % to reflect higher NGL and oil prices and higher olefin margins. Capital expenditure guidance has been updated for 2011 and increased for 2012 to reflect new midstream projects in the Gulf of Mexico, as well as updated timing of certain projects.

Williams Companies came up with better-than-expected numbers, reflecting positive production figures, strong contributions from gas pipeline business, and higher per-unit ethylene / propylene margins. WMB is able to harness the strength of its reserves portfolio. Midstream operations are benefiting from increased throughput in gathering and processing, and a strong NGL price environment.

WMB announced a takeover bid for Southern Union Company (SUC) for $4.9 billion. The offer includes the assumption of $3.7 billion of debt. If successful, the bid will be value accretive to WMB. Buying Southern Union would strengthen Williams’ business in natural gas transportation. Together, the companies would have nearly 30,000 miles of regulated pipelines. A deal would give Williams access to pipelines connected to several shale formations in which it has no presence.

General Electric (NYSE:GE) is a Connecticut-based highly diversified, global industrial corporation. Its businesses are organized broadly under six segments: GE Capital, Energy Infrastructure, Aviation, Healthcare, Transportation and Home & Business Solutions. The company's products and services include power generation equipment, aircraft engines, locomotives, medical equipment, appliances, commercial leasing and personal finance.

My Take: Hold

In the first quarter results of GE reported operating earnings of $3.6 billion, up 58%, or $0.33 per share, up 65%, from the first quarter of 2010. GAAP earnings from continuing operations (attributable to GE) were $3.4 billion, or $0.31 per share, both up 48% year-over-year. Revenues grew to $38.4 billion for the quarter, up 6% from a year ago. GE Capital also had a strong first quarter, earning $1.8 billion after tax. First-quarter revenues increased 6% to $38.4 billion. GE Capital Services’ revenues increased 3% from last year to $13.2 billion. Industrial sales of $22.1 billion decreased 6% versus 2010.

The company grew R&D investment by 12% and launched nearly 50 new healthcare and energy products.GE has been expanding its research capabilities globally. The company opened its first research center in Bangalore. GE’s research center in China was subsequently modeled after India and a new research center is scheduled to open in Brazil.

GE Aviation and its joint venture companies signed $27 billion in deals at the Paris Air Show. It will take time for the airplane engine orders to bear fruit. Though revenues increased by 3% for GE Capital Services, industrial sales fell by 6%.

Rowan Companies, Inc. (NYSE:RDC) is an international provider of contract drilling services with a focus on high-specification and premium jack-up rigs located worldwide, including the Middle East, the North Sea, Trinidad, the U.S. Gulf of Mexico, and Mexico. Rowan has a market leading position in high-specification jack-up rigs, which remain in high demand.

My Take: Buy

RDC recorded adjusted first-quarter 2011 earnings of 49 cents per share, less than the earlier profit of 56 cents from a year ago. The company’s drilling operations generated revenues of $250.0 million in the quarter, down 24.5% year over year, mainly due to lower average day rates.

On June 23rd, RDC sold of its manufacturing unit LeTourneau Technologies, Inc . for an all cash transaction of $1.1 billion. The sale will enable Rowan to monetize its non-core assets at a highly attractive price and transform itself into a pure-play offshore driller. The after tax proceed of $875 million will be used to finance its expansion into the ultra-deepwater drilling business.

On June 1st Rowan entered into a contract with Hyundai Heavy industries for the construction of two ultra-deepwater drill-ships with a cost of approximately $605 million each. The addition of the deepwater drill-ships will be accretive to Rowan’s earnings potential. The ultra-deepwater market remains strong given the increased level of planned activity from national oil companies, and high oil prices. Brazil and West Africa are the main areas for ultra-deepwater drilling.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.