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Stocks That Are Cheaper Than Julian Robertson Bought
Posted by: Ale Schuvaks (IP Logged)
Date: January 6, 2012 09:24AM
Julian H. Robertson Jr. is an American former hedge fund manager. He started working at Peabody & Co. in New York in 1957 and, over a 20-year career, became one of the firm's top producing stockbrokers. Then, he founded the investment firm Tiger Management Corp., one of the earliest hedge funds in 1980 with $8 million start-up capital that became over $22 billion in the late 1990s.
Now retired, Robertson invests directly in other hedge funds, most run by former employees of Robertson's defunct hedge fund company. He is active in philanthropy and supporting the resolution of environmental issues.
Looking back to Tiger Management Corp., the company had had year after year brilliant returns of $8 million in 1980 that turned into $7.2 billion in 1996.
Robertson was the reigning titan of the world's hedge funds.
Unfortunately Tiger was gradually diminished from 1998 to 2000, when all its funds were closed. This demise was evidenced by the plunge in assets under management from a peak of $22 billion in 1998 to a closing value of $6 billion.
After closing his fund in 2000, Robertson kept his hand in the hedge fund business by supporting and financing upcoming hedge fund managers, in return for a stake in their fund management companies.
At an interview given a few years ago, he talked about his mandate: “Our mandate is to find the 200 best companies in the world and invest in them, and find the 200 worst companies in the world and go short on them. If the 200 best don't do better than the 200 worst, you should probably be in another business. “
His investment style, about which there is very little written, consisted of a "smart idea, grounded on exhaustive research, followed by a big bet." Not exactly a practical framework that would work for the general investing public.
Here are some of his latest stocks:
Cablevision Systems A (CVC): Cablevision is one of the largest multimedia companies in the U.S. Its slimmed-down operations now span two distinct segments: a cable TV and high-speed data business and Newsday, a daily newspaper serving Long Island, acquired from The Tribune Company in 2008. The cable footprint passes more than 5 million households and businesses with its state-of-the-art fiber-rich network.
Since 2009 the firm has done a good job of lengthening its debt maturity schedule. Through the first half of 2011, the firm grew its free cash flow per share by 38% on a pro forma basis. Net revenue in its core telecommunications business rose by 9% year over year to $1.56 billion
The company's primary service footprint is in the densely populated New York City Metroplex, whose technologically progressive and wealthy population is receptive to its premium data and video offerings.
Even as its markets continue to mature, the firm continues to increase its cable ARPU at an accelerated rate. Management raised its dividend twice in the last two years, and is in the midst of a billion dollar buyback initiative.
WuXi PharmaTech (Cayman) Inc. (WX): is the leading China-based pharmaceutical and biotechnology R&D outsourcing company. As a research- driven and customer-focused company, WuXi PharmaTech provides pharmaceutical and biotechnology companies a broad and integrated portfolio of laboratory and research manufacturing services throughout the drug discovery and development process.
The company's revenue is split between two segments: laboratory and manufacturing services.
The company ended the third quarter with more than $200 million in cash and only $66 million in debt on its balance sheet. It announced a solid 24% growth in revenues during 2010, and a further 20% increase in its top-line for 2011. During 2010, WuXi’s sales totaled $334.1 million. The company predicts it’ll reach around $400 million in the years to come.
In addition, WuXi is the leading contract research organization in the booming Chinese market, allowing it to doubly benefit from an increase in drug-development outsourcing and a greater trend toward off-shoring of R&D services.
WuXi has a reputation for excellent quality, service, and protection of customer intellectual property.
The Goldman Sachs Group Inc. (GS): Goldman Sachs is a global investment banking firm whose activities are organized into investment banking, institutional client services, investing & lending, and investment management segments. The firm recently reorganized itself as a financial holding company regulated by the Federal Reserve.
Even if its structure has changed, Goldman still has the same capable management and employees that enabled it to outperform in recent years. Increased returns on assets may offset the decrease in leverage. Several of the company's primary U.S.-based competitors have been forced to restructure, and this could give Goldman an opportunity to gain market share.
Netflix Inc. (NFLX): Netflix operates a fast-growing DVD rental and video streaming service available in the United States, Canada, and eventually Central and South America. Netflix delivers digital content to PCs, Internet connected TVs, and consumer electronic devices including but not limited to the Xbox 360, Playstation, and Wii.
Financially speaking, Netflix does not have any near-term debt maturities. Although some of its cash is earmarked for share repurchases and investment in its digital download initiative, the company has more cash than debt.
Netflix's internal recommendation software and large subscriber base could give the company an edge on new competitors when deciding which content to acquire in future years.
Teva Pharmaceutical Industries Ltd. (TEVA): Teva Pharmaceutical is the world's largest generic pharmaceutical manufacturer, with operations in 60 countries. Teva operates 38 finished dosage sites, 15 research and development centers, and 21 active pharmaceutical ingredient manufacturing sites. It is located in Israel.
Teva boasts strong financial health as management has demonstrated financial conservatism by maintaining low financial leverage and keeping plenty of cash on the balance sheet. Despite an aggressive acquisition strategy, management appears to have prudently avoided overpaying for acquisitions.
Teva ended 2010 with approximately $1.3 billion in cash at about 7% of tangible assets.
Teva has the scale and resources to minimize the entry of low-cost producers. Teva's emergence as a hybrid generic/innovative pharmaceutical company allows for consistent stable cash flows with above-average profitability and growth.
Guru Discussed: Julian Robertson: Current Portfolio, Stock Picks
Stocks Discussed: CVC, GS, TEVA, WX, NFLX,