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John Buckingham’s Top Sells for the Third Quarter: HD, WMT, NXY
Posted by: Dianne Tordillo (IP Logged)
Date: November 9, 2012 11:25PM
Milwaukee-based Al Frank Asset Management, whose portfolio is managed by Guru investor and chief investment officer John Buckingham reported a total of 34 changes to its portfolio for the third quarter. The updates consisted of shareholding reductions to five companies and complete sells of all its shares of seven companies, in addition to 11 adds and 11 new buys.
Founded in 1977, Al Frank Asset Management not only manages private accounts but also two mutual funds: the Al Frank Fund and the Al Frank Dividend Value Fund.
The firm’s investment philosophy is based on three core principles: selection, diversification and patience.
The Al Frank Asset Management website elaborates more on its investment motives explaining: “We don’t limit ourselves to specific market capitalization constraints. Nor do we abide by absolute stock valuation metrics, instead allowing ourselves to be more flexible in defining what we believe are undervalued names."
Describing its third investment virtue, the firm continues: “Patience in turn enables us to have low turnover of our holdings, which keeps our trading costs down while potentially improving our after-tax returns (as realized capital gains are often of the long-term variety). To minimize risk and maximize opportunity, our holdings of individual stocks number in the hundreds, we think improving our chances of owning those rare few stocks that everyone wishes they’d noticed earlier.”
With an equity value of $575 million, Al Frank Asset Management maintains 134 stocks in its portfolio, with a quarter-over-quarter turnover rate of eight percent.
Below are three stocks among the firm’s third quarter sells that made the most impact in its portfolio: Home Depot Inc. (HD), Wal-Mart Stores Inc. (WMT) and Nexen Inc. (NXY)
Home Depot Inc. (HD)
Selling all of its shares of home improvement retailer, Home Depot Inc. (HD) in the third quarter impacted Al Frank Asset Management’s stock portfolio by 1.3 percent.
With Home Depot’s price close to its 10-year high of $63.15, it’s currently trading at $61.15 and has a market cap of $90.52 billion (an enterprise value of $98.52 billion).
Home Depot’s Financial Strength rank on GuruFocus is a strong 8 out of 10, showing positive trend lines for revenue, earnings per share and free cash flow, despite an operating margin that has been in a five-year decline.
Yet, Home Depot’s operating margin is 12.5 percent, although in decline, is still higher than its major competitor, Loews Corp. (L), whose operating margin, while on a positive trend, is at 9.6 percent.
Additionally, Home Depot has a Profitability and Growth rank of 7 out of 10 and a Business Predictability rank of 1 out of 5 stars.
Home Depot has a P/E ratio (ttm) of 21.2, a P/B ratio of 5.4 and a P/S ratio of 1.3 – all three are close to their three-year highs, which appear as part of the company’s five Medium Warning Signs.
Besides John Buckingham, other Gurus who have sold out of their Home Depot shares include Meridian Funds, Brian Rogers, Ray Dalio, George Soros and Paul Tudor Jones.
View Home Depot’s holding history with other Gurus here.
Wal-Mart Stores Inc. (WMT)
After selling out all of its shares of giant retailer, Wal-Mart Stores Inc. (WMT), the total impact made on the Al Frank firm’s stock portfolio amounted to 1.1 percent.
The firm’s long-term holding history of Wal-Mart stocks dates back on or even before the first quarter of 2007. Before selling all of its stock in the third quarter, Al Frank Asset Management had more than 85,000 shares of Wal-Mart.
Wal-Mart is currently selling around its 10-year high at $72.54 per share.
WMT data by GuruFocus.com
With no Severe Warning signs, and in fact, six Good Signs indicating booming revenue, operating margin and dividend yield (which is actually close to its 10-year high), Wal-Mart secures a 7 out of 10 Financial Strength on GuruFocus as well as a Business Predictability rank of a full-fledged 5 out of 5 stars.
One of Wal-Mart’s fiercest competitors, bulk retailer, Costco Wholesale Corp. (COST) appears with similar standings.
Like Wal-Mart, Costco is also selling at its 10-year high at $95.36, with no Severe Warning signs and solid Financial Strength. While Costco is a smaller corporation (its market cap is $41.91 billion compared to Wal-Mart’s $251.52 billion), it targets a more exclusive consumer population by operating under club memberships.
Besides Buckingham, other Gurus who have sold out of their shares of Wal-Mart include Arnold Van Den Berg, Wallace Weitz, Richard Perry, Louis Moore Bacon and Paul Tudor Jones.
View Wal-Mart’s holding history with other Gurus here.
Nexen Inc. (NXY)
Calgary-based Nexen Inc. (NXY) is involved in the energy resources development business that focuses on three major areas: conventional oil and gas, oil sands and shale gas. Nexen has operations in the UK North Sea, offshore West Africa, the Gulf of Mexico and Western Canada, according to its website.
Nexen is currently awaiting completion of the company’s acquisition by Chinese offshore oil and natural gas producer, CNOOC Ltd.(CEO), a $15.1 billion transaction scheduled to close in the fourth quarter.
Upon the announcement of the acquisition in July, Nexen’s stock price saw an overnight jolt as CNOOC declared an all-cash price of $27.50 for each Nexen common share, covering closing costs and its volume-weighted average share price.
NXY data by GuruFocus.com
The purpose of the transaction is for CNOOC Ltd. to expand its Canadian presence, as well as in Nigeria, Gulf of Mexico and the UK North Sea.
Selling all of its shares of Nexen created an impact of 0.9 percent, while Al Frank Asset Management once had more than 300,000 shares of Nexen when it first introduced it to its portfolio in the fourth quarter of 2011.
Prior to the acquisition announcement in July, Nexen was trading around $15, maintaining a ranking on GuruFocus of 2 out of 5 stars in Business Predictability, 6 out of 10 in Financial Strength and 7 out of 10 in Profitability and Growth.
The oil and gas sector is currently the sixth largest industry represented in the firm’s portfolio, with industrials, technology and unassigned stocks as its top industry holdings.
Nexen has a market cap of $12.4 billion (an enterprise value of $14.76 billion).
It will maintain its Nexen name and brand after the acquisition.
View the rest of the changes on John Buckingham’s portfolio here. Also view other articles about John Buckingham and Al Frank Asset Management in our GuruFocus archives.
Guru Discussed: John Buckingham: Current Portfolio, Stock Picks
Stocks Discussed: HD, WMT, NXY, L, COST, CEO,