Highest-paid fund manager keeps buying
David Tepper, who returned 30% to investors last year, likes Qualcomm, Goodyear and Hartford Financial.
Tepper has built Qualcomm into his fourth- largest portfolio position. The stake consists of 2,979,941 shares, or 4.2% of his portfolio. His most-bought stock, Tepper has added shares each of three quarters after initiating a position in the first quarter of 2012. The purchase prices ranged from an average of $60.57 to $65.49. Qualcomm shares are trading at $63.60 on Tuesday.
Qualcomm is a global wireless technology and services provider divided into 15 businesses, with a $109.25 billion market cap.
As Wedgewood Partners' David Rolfe noted in his third-quarter 2012 letter, Qualcomm "has one of the largest net cash balances in Corporate America and ample free cash flow generation." At first quarter-end, that balance stood at roughly $15.3 billion, after growing for the last three quarters. Free cash flow has also increased annually for the past three years, reaching $4.7 billion in 2012, its highest mark since 2009.
Price, cash balance and free cash flow history chart:
Revenue and net income have also grown substantially, while its P/E has declined to the lower end of its valuation range over the past several years:
The company continues to benefit from the worldwide adoption of smartphones, company chairman and CEO Dr. Paul E. Jacobs noted in the second quarter financial report, and raised its 3G/4G device shipment estimates for calendar 2013, and its revenue and earnings guidance for fiscal 2013.
Goodyear Tire & Rubber Co. (GT)
Tepper has been adding to his Goodyear Tire & Rubber stake for five consecutive quarters, though he has held the position since the latter half of 2008, when shares fell all the way to $8 on average. He controls 15,230,801 shares total, or 6.21% of total shares outstanding. Goodyear trades for $14.90 per share Tuesday.
Goodyear is the No. 1 tiremaker in North America and Latin America, and the second largest in Europe, with operations 22 countries and a $3.9 billion market cap.
While Goodyear's first quarter 2013 sales declined to $4.9 billion from $5.5 billion the previous year, it increased net income to $26 million from a net loss of $11 million the previous year through improved productivity and innovative products.
Goodyear's longer-term price, revenue and earnings history:
The company’s Peter Lynch chart indicates that it is currently overvalued:
Hartford Financial Services Group Inc. (HIG)
Tepper added to his Hartford Financial Services stake, which he initiated in first quarter 2012, for the past three quarters. He owns 5,304,459 shares of the company total, making a 2.9% portfolio weighting. On Tuesday shares trade for $29.59, so he has a substantial gain on the holding he paid between $17.75 and $24.66 per share for on average.
Hartford is a 203-year-old property and casualty insurer with a $13.7 billion market cap. In first quarter 2013, Hartford reported a net loss of $241 million, compared to net earnings of $96 million the previous year. The loss was primarily due to a $541 one-time charge for expanded hedging of its international variable annuity block, and paying down $138 million in debt.
Hartford's long-term P/B and P/S valuation ratio chart:
The company announced on May 16 significant progress toward its transformation plan, including completing its divestitures and increasing core revenue growth 19% year over year. It also announced a $1.5 billion capital management plan accretive to shareholders over the next two years and that it is planning phase two of the capital management plan.
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