Every quarter, many money managers have to disclose what they've bought and sold, via "13F" filings. Their latest moves can shine a bright light on smart stock picks.
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Today let's look at Fisher Asset Management, founded in 1979 by Ken Fisher, who's on Forbes magazine's list of the 400 richest Americans. The company manages money for more than 100 large institutions, and its strategy involves macroeconomic research and fundamental analysis. You may know Fisher's father, Phil Fisher, as he wrote the seminal investing text, Common Stocks and Uncommon Profits. The company's reportable stock portfolio totaled $48.4 billion in value as of the end of 2014.
So what does Fisher Asset Management's latest quarterly 13F filing tell us? Well, it's been shrinking some of its positions, including the three below.
Fisher pared back its Nike holdings by 15% -- perhaps because of concerns about its valuation. Its recent P/E ratio near 28 and a forward-looking one of 23 are both above its five-year average of 22. With a market capitalization topping $80 billion, Nike is a huge company, yet is still able to deliver solid growth. Its stock has averaged annual growth of 22% over the past 30 years, and 17% over the past 10. Revenue, meanwhile, has grown by an annual average of about 9% over the past decade, while earnings per share have averaged 13%. In its last quarter, revenue jumped by 15%, with earnings popping by 25%.
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Behind this strength and growth is a leading market position -- not to mention the fact that its profit margins have been inching up in recent years as well. Gross margin recently topped 45% and net margin has hit 10%. Nearly three-quarters of all NBA players wear Nike shoes, if you include its Air Jordan Brand subsidiary. The company is about more than just shoes, though, encompassing apparel, athletic equipment, and other innovative items, such as the Fuelband wearable fitness tracker. (Its brands include Converse and Chuck Taylor.) Finally , its success is global, with its last quarter reflecting year-over-year revenue growth of 16% in North America and, excluding currency effects, 24% in Western Europe and 21% in Greater China, where it has struggled recently.
Nike offers a dividend to patient believers, recently yielding 1.2%. That might not seem like much, but it has doubled over the past five years, with more room to grow.
Source: Lloyds Banking Group.
Lloyds Banking Group PLC
Lloyd's Banking Group is the U.K.'s largest mortgage lender, and Fisher Asset Management has pared back its position in it by 35%. Like its big-bank counterparts in the U.S., Lloyd's was whacked during the banking crisis of a few years ago, and bailed out by the British government. Its dividend was curtailed then, as well. It appears to be on the cusp of reinstating that payout, though, while government holdings are being sold off to some degree. U.K. taxpayers have owned as much as 43% of the company, and the government is aiming to get that down from about 25% to 20%.
The folks at Fisher must expect the company to turn itself around, but its past few years reflect inconsistent results and only recently a bit of profit. Still, that's a move in the desired direction, and some are hoping that as Europe's economy improves, so will Lloyd's fortunes. In the meantime, the company is closing about 200 branches as more customers move their banking online. That can translate to cost savings for Lloyd's, but its large branch network has long been a competitive advantage.
Image: Daniel Voyager, Flickr
International Business Machines Corp.
Shares of IBM have lost ground over the past two years, and Fisher Asset Management has pared back its holding in it by 23%. In a rapidly changing technology environment where much software is moving from PCs and laptops to the cloud, IBM has been scrambling to develop competitive cloud platforms. The company has been shedding some lower-margin businesses while reconfiguring itself. This is a costly endeavor, though, and it's hard to change quickly when you're a company with a market capitalization topping $160 billion.
While revenue hasn't been growing much in recent years, free cash flow has been substantial, topping $12.6 billion over the past 12 months, and its share count has been dropping though some grumble that much of its earnings-per-share growth has been due to share repurchases. IBM's software business is enjoying profit margins of about 45%, while its mainframe business remains strong. Its cloud, security, and mobile services businesses have been growing briskly -- up 60%, 19%, and more than 200% in 2014, respectively. Though none of these are big enough at this pointto move the overall needle as much as investors would like.
IBM's stock does seem undervalued at recent levels, with its current and forward-looking P/E ratios near 10. Patient believers can collect a dividend, which has doubled over the past five years and recently yielded 2.7%. IBM's turnaround won't happen overnight, but it has proved many times in its lengthy history that it has the resources to succeed over the long term.
The article Heres What One of the Richest Americans Has Been Selling originally appeared on Fool.com.
Longtime Fool specialist Selena Maranjian, whom you can follow on Twitter,owns shares of Lloyds TSB Group. The Motley Fool recommends Nike. The Motley Fool owns shares of International Business Machines and Nike. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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