Author: Yale Bock, Y H & C Investments
Covestor model: Long Term GARP
Disclosure: Long all stocks mentioned below
The Long Term GARP portfolio had a good month in August, as the portfolio was up nearly 5% for the month*, outperforming the Nasdaq, Dow, and S&P 500. August was a month of light volume and not much volatility and I am very confident trading levels will pick up in September and throughout the rest of the year.
In the portfolio, holdings were pretty active as there were a few acquisitions, a couple of earnings reports, and one company raised their dividend as well. As the portfolio is full of powerful companies, there are always things happening which are eventful, and I know several companies are presenting at investment conferences during the month.
Liberty Interactive (LINTA) is the owner of QVC, Bodybuilding.com, Provide Commerce, Buyseasons.com, Backcountry.com, and large passive minority positions in other large, well known internet based business like the Home Shopping Network. Liberty Interactive reported earnings on August 8, 2012 which were pretty solid.
Liberty also completed their split off of Liberty Ventures with dividend to all shareholders-
Liberty Ventures has large passive equity positions in Expedia.com, Tripadvisor.com, Interval Leisure Group, Tree.com, and a great deal of cash, as well as other passive equity holdings.
ICONIX (ICON) is the owner of a broad range of well known brands like OP, Mossimo, Joe Boxer, Peanuts, and Sharper Image. They have a business model which outsources everything except licensing to the largest retailers in the world. In addition, they have partnerships set up to expand and grow their businesses in the largest emerging markets in the world-China, India, and Brazil. They also grow through acquisitions and by using debt wisely.
Quest Diagnostics (DGX) is the largest health care diagnostic testing company in the United States, and the company’s announced earnings on July 19 which were not as good as what Wall Street expected. The company generated over a billion dollars in cash during the last year and has a non capital intensive business, which allows for management to search for acquisitions, make share repurchases, and raise the dividend.
Intuit (INTU) is the owner of the QuickBooks, TurboTax, Mint.com, and GoPayment businesses. The company is expanding its different businesses in different geographic regions, including the U.K., India, Canada, and Asia. The company recently raised their dividend to 17 cents a share in each quarter. The balance sheet is strong with debt and cash of about one billion each.
Intuit reported earnings on August 21 that were a little light on revenues and met the EPS expectations. The company decided to sell their web sites division and completed the acquisition of Demandforce.
Starbucks (SBUX) is the largest coffee and tea company in the world, expanding the business into juice, as well as growing their presence in China. The stock released earnings which disappointed Wall Street and the stock suffered its worst day in 12 years. I believe it would be the biggest gift in the world if the stock fell to attractive levels again so I could buy more shares.
Liberty Media’s (LMCA) holding company structure includes equity stakes in such companies as Starz Media, the Atlanta Braves, 40% ownership of Sirius Satellite (SIRI), almost 20% ownership of Live Nation (LYV), 16% ownership of Barnes & Noble, and a few other non controlling positions of small public and private.
Starz generated about 300-400 million dollars of cash flow during the last year and has little debt, and LMCA has almost 2.5 billion dollars of cash (after debt considerations, $1 billion) as of the last quarter, so there is much to be speculated as LMCA has plenty of firepower to do what it wants to do.
Liberty Media announced earnings on August 8, 2012, and have increased their position in Sirius (SIRI) to over 49%. In addition, they will spin off the Starz division into a new company. They also bought back almost $100 million of LMCA stock.
VCA Antech (WOOF) is the second largest owner of animal hospitals in the United States, also owns the laboratories for diagnostic testing of animals. The most recent earnings report disappointed Wall Street and the stock has retreated quite a bit since the last earnings report. Still, it is a very strong company and the stock is a candidate for more purchases.
Here is a link to their most recent presentation.
IAC Interactive (IACI) owns Ask.com, Match.com, Meetic, Service Magic, Vimeo, CollegeHumor.com, and the Daily Beast, among other web sites. The company reported another excellent quarter. The company bought back more shares and doubled the dividend at the most recent earnings report. In addition, they recently announced the acquisition of About.com and Datehookup.com.
Moneygram International (MGI) is the second largest money transfer and bill payment company behind Western Union (WU). The position is really a private equity strategic investment as Goldman Sachs (GS) and Thomas Lee Partners own 75% of the common equity.
The stock has done very little for the last three years but the business is not capital intensive, is growing 5-8% per year, and in my opinion at some point the majority owners would like to be able to monetize their positions. They reported another good quarter last week. Here is a link to their most recent presentation at the JP Morgan Conference.
British Petroleum (BP) is the second integrated oil company in the world.The company is the largest explorer in the Gulf of Mexico and has exploration activities all over the world. BP recently reopened their largest fields in the Gulf of Mexico, and the 4th quarter should bring all operations in exploration and production to a complete restoration. As such, look for BP to start to improve their barrels of production beginning in the last quarter and continuing on into 2013.
Quidel Corporation (QDEL) is a health care and diagnostic company which makes influenza tests and is expanding their product line into strep throat, graves disease, and other molecular assays. Their most recent earnings report was better than expected.
Unilever (UK:UVLR) is a massive food company based in the UK that gets over half of it’s nearly 50 billion dollars of sales in the emerging markets of Asia and Africa. The company pays a dividend of 3.7% and has the goal of doubling its sales by 2020. Here is a link to their most recent earnings report, which showed very good top line growth for a company as large as Unilever.
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*Performance discussed is net of advisory fees. Also, any investments discussed in this presentation are for illustrative purposes only and there is no assurance that the adviser will make any investments with the same or similar characteristics as any investments presented. The investments are presented for discussion purposes only and are not a reliable indicator of the performance or investment profile of any composite or client account. Further, the reader should not assume that any investments identified were or will be profitable or that any investment recommendations or that investment decisions we make in the future will be profitable.
Certain of the information contained in this presentation is based upon forward-looking statements, information and opinions, including descriptions of anticipated market changes and expectations of future activity. Covestor believes that such statements, information, and opinions are based upon reasonable estimates and assumptions. However, forward-looking statements, information and opinions are inherently uncertain and actual events or results may differ materially from those reflected in the forward-looking statements. Therefore, undue reliance should not be placed on such forward-looking statements, information and opinions.
