Atalanta Sosnoff Capital's 7 Big Buys And Sells

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Includes: F, GOOG, GS, MA, MSFT, NTAP, NWSA
by: Efsinvestment

Founded by Martin T. Sosnoff, Atalanta Sosnoff Capital is a growth-oriented asset management firm. The company utilizes the earnings acceleration concept as a refinement of traditional growth investing. According to the company profile, this strategy aims at picking companies with increasing earnings growth rates. Since its inception in 1990, Sosnoff Capital was able to provide an annualized gross return of 9.6%. After deducting fees, it amounts to 9%, which is still higher than the corresponding S&P 500 (NYSEARCA:SPY) return of 7.8%.

As of the 2011 third quarter, Atalanta Sosnoff had a diversified portfolio of equities. According to Edgar Online, technology stocks constitute 28.8% of the portfolio, followed by service companies (21.63%) and financials (17.12%). In the most recent quarter, the firm made significant transactions. I have analyzed the 3 big sells and 4 big buys from a fundamental perspective, adding my O-Metrix scores, when applicable. Here is a fundamental analysis of the 3 big sells and 4 big buys by Atalanta Sosnoff Capital:

Big Sells

Company Name

Ticker

Shares Held

% Change

% of Portfolio

O-Metrix Score

NetApp

NTAP

0

Sold Out

0

4.63

Goldman Sachs

GS

0

Sold Out

0

5.64

Ford Motor

F

0

Sold Out

0

4.33

Big Buys

Microsoft

MSFT

10.09 million

12,685%

3.72%

7.58

News Corporation

NWSA

12.11 million

New

2.94%

4.18

Google

GOOG

0.64 million

100.72%

5.30%

5.98

Mastercard

MA

0.44 million

New

2.10%

4.60

Data obtained from Finviz/Morningstar and is current as of November 1. You can download O-Metrix calculator here.

Big Sells

California-based NetApp is among the primary players in the data storage devices business. While the company is doing fine, the stock was going south for a while. NetApp has lost 25% since January. However, the company is pretty profitable, with a gross margin of 64.27% and net margin of 12.20%.

While its trailing P/E ratio is 24.82, the forward P/E ratio falls to 14.73. The stock is trading at 13.37 times its free cash flow. Based on an annualized EPS growth estimate of 18.30%, it has an O-Metrix score of 4.63. Fair Value range is $44 - $54 per share.

Goldman Sachs has been falling off a cliff. Even after returning 16% in the last month, the stock is still trading 37% below its 52-week high.

Banking stocks are highly volatile, and Goldman Sachs is no exception. As of the time of writing, Goldman Sachs was down 5%. There are still a lot of things going on in the eurozone; if Greece rejects the foreign aid, the Europeans will need a plan B, which does not exist yet. Although Goldman Sachs is one of the cheapest stocks among financials, the timing is not right for entry.

Ford Motor has also been dropping sharply for a while. Even after returning 20.1% in the last month, the stock is trading 38% below its 52-week high.

It is quite hard to say whether Ford stock will keep on falling or reverse its trend. The stock is obviously cheap, with a trailing P/E ratio of 6.95 and forward P/E ratio of 6.67. Analysts are pretty bullish with Ford. Their mean target price of $17.25 implies almost 50% upside potential September registered several insider buys. Even if we assume zero growth, Ford’s fair-value range is around $17. Thus, the stock has significant upside potential.

Big Buys

Technology stocks are trading at great discounts, and Microsoft is no exception. Apparently, the stock looked too cheap for Sosnoff Capital, which purchased around 10 million new shares in the third quarter.

Microsoft is trading at a trailing P/E ratio of 9.68, and forward P/E ratio of 8.65. The stock offers a yield of 3.00%. Based on 10.90% annualized EPS growth estimate, Microsoft has a fair value range of $44 - $50. Its O-Metrix score of 7.58 is also well above market average.

News Corporation has been an outperformer in 2011, returning almost 22%. It is trading near its 52-week highs. Sosnoff Capital initiated a new purchase of 12.11 million shares in the last quarter.

Debt to equity ratio of 0.53 is a moderate red flag. Based on 9.70% annualized EPS growth estimate, News Corporation has a fair value range of $20 - $31. Its O-Metrix score of 4.18 is in line with the market average. UBS has a neutral rating with a target price of $19.

Google has been extremely volatile in 2011, bouncing back and forth within $500 - $620 range. While analysts are extremely bullish on the stock, the year-to-date return was still in the negative territory, as of November 1.

Google is highly profitable with a gross margin of 65.24%, and net margin of 26.78%. Based on 20.20% annualized EPS growth estimate, it has a fair value range of $763 - $932. Its O-Metrix score of 5.98 is above the market average. RBC Capital has an outperform rating with a target price of $800.

While financial stocks have been heading south, as a business service provider, MasterCard has been one of the star performers in 2011. Since January, shareholders enjoyed a whopping return of 55%. The company does not have any debt issues, but P/B ratio of 8.07 is a little bit scary.

MasterCard is highly profitable, with an operating margin of 50.65%, and net margin of 34.87%. Based on 17.40% annualized EPS growth estimate, it has a fair value range of $350 - $393. Its O-Metrix score of 4.60 is in line with the market average. Analysts also agree with me. Their mean target price of $375 is at the middle of my FED+ fair value range.

Disclosure: I am long MSFT.

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