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John Hussman Reports Target, Coinstar, Baxter and CF Industries as Largest New Purchases
Posted by: Holly LaFon (IP Logged)
Date: August 3, 2012 05:02PM
The Hussman Funds are a group of funds run by John Hussman, a value investor who writes a widely read weekly market commentary. The average total return for the funds since inception in 2000 is 5.37%.
Hussman’s portfolio contains 206 stocks. In the second quarter, he bought 14 new stocks, with relatively small positions in each. The biggest new buys were Target (TGT), Coinstar (CSTR), Baxter International (BAX) and CF Industries Holdings (CF).
John Hussman bought 1,500,600 shares of Target Corp. (TGT) at an average price of $57 per share in the second quarter of 2012. Target is the retail corporation with 1,764 stores in the U.S. and which will open its first stores in Canada in 2013.
Target has been growing its revenue and EBITDA per share at an annual rate of 9.3% and 9.1% annually over the last 10 years. The company increased sales for most of the years in the last decade, save for a brief lag from 2004 to 2005. In 2012 it recorded record sales of $69.9 billion.
In its fiscal first quarter 2012, Target repurchased approximately 10.5 million shares for a total of $604 million and paid dividends of $201 million. In March it completed its $10 billion share repurchase program it began in 2007, for a total repurchase of 193.5 million shares, or nearly 23% of shares outstanding in November 2007. Its average purchase price was $51.68 per share. Its new plan, authorized in January 2012, is to repurchase $5 billion in shares in the next two to three years.
Target and Nieman Marcus have announced that they will partner to sell an array of holiday items by 24 top designers. "These will be the 'must-have' gifts, whether you are a loyal Neiman Marcus customer, a devoted Target guest or a fan of American design," Neiman Marcus CEO Karen Katz said in a statement.
John Hussman bought 500,000 shares of Coinstar at an average price of $63 in the second quarter. Coinstar is the owner of RedBox DVD and video game rental and Coinstar self-service coin-counting kiosks.
Coinstar has been growing at a rapid pace while its PE ratio has remained low at 10.6. The company produced a revenue per share growth rate of 26% and EBITDA per share growth of 18.4% over the last 10 years, growing revenue from $156 million in 2002 to $1.9 billion in 2011. The company’s net margins have also expanded significantly in recent years, from negative 4.1% in 2007 to 5.6% in 2011.
In the second quarter, Coinstar expanded its Redbox kiosks into Canada and launched its Rubi coffee kiosks in partnership with Seattle’s best Coffee, along with several other growth initiative. The company also purchased the assets of NCR Corp. (NCR)’s self-service entertainment DVD kiosk business, including its DVD kiosks, DVD inventory, intellectual property and certain retailer contracts. The acquisition will result in temporary losses while it replaces the old kiosks with Redbox kiosks, and will become accretive sometime in 2013.
Baxter International (BAX)
Hussman bought 501,000 shares of Baxter International at an average price of $54 in the second quarter 2012. He had closed out a smaller position in the first quarter of 2012 when the price was higher, at $56 on average. Baxter International is a global healthcare company focused on products that assist people with hemophilia, immune disorders, infectious diseases, kidney disease, trauma, and other medical conditions. Its stock price has gone up 19% year to date.
Baxter International has been a steadily growing company, with revenue increasing each year for the last decade and EBITDA per share growing at a 6.4% annual rate over the same period. It also produces consistent free cash flow.
Second-quarter results showed a 7% rise in earnings from the previous year and 1% on an adjusted basis, to $619 million from $615 million.
Baxter also affirmed its full-year 2012 guidance of sales growth of 5 to 6% excluding the impact of foreign exchange. Earnings per share are expected to be in the range of $4.50 to $4.56 per share, and cash flows from operations to exceed $3 billion. Last year’s earnings per share were $3.91 per share.
CF Industries Holdings (CF)
Hussman bought 100,000 shares of CF Industries at an average price of $178 in the second quarter of 2012. It accounts for just 0.36% of his portfolio. CF Industries is a large fertilizer manufacturer and distributor. The company’s stock is up 266% over the last five years and about 39% year to date.
CF Industries has been characterized by rapid growth. In the last five years its revenue per share growth rate has been 15.3%, and EBITDA per share has been 52.7%. The company still has a P/E ratio of 7.9. It also has $2.2 billion in cash on its balance sheet and $3 billion in debt.
The company’s first quarter showed more of the same. It had record first quarter net earnings of $368 million, compared to $282 million in the prior-year quarter. Record first quarter net sales were $1.5 billion, a 30% increase from $1.2 billion in the prior year quarter. The company’s results were helped by an exceptionally mild winter and early spring weather that created field conditions, placing nutrient application ahead of normal schedules, and increasing the demand for ammonia and urea.
The results were also favorably impacted by an increase in nitrogen prices, and a 37% increase in nitrogen net sales. Natural gas price declines are another favorable condition for the company’s production of nitrogen products as the hydrogen and ammonia in it come from natural gas.
See the rest of John Hussman’s portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of John Hussman.
Guru Discussed: John Hussman: Current Portfolio, Stock Picks
Stocks Discussed: TGT, CSTR, BAX, CF,