Tweedy Browne's first quarter letter is out. Below is a discussion of some holdings of the company:
G4S Plc (GFS:LN), based in the UK, is the world’s leading international security group offering security services in a number of categories including security guards, alarms, prison management, cash and valuables transportation, among others. It generates high free-cash flow, has significant exposure to faster growing emerging markets, has paid a dividend yield north of 3%, and trades at a discount from estimated intrinsic value. It is one of the few security companies that can handle the diverse and often global needs of large corporations and governments.
British American Tobacco (BATS:LN) is the third largest tobacco company in the world. It operates in 180 markets and has 250 brands. It also has a 42% position in Reynolds American (RAI, Financial), the second leading U.S. tobacco manufacturer, and a 31% stake in ITC Ltd. (ITC:IN), the leading cigarette manufacturer in India.
BAT is a high-return-on-capital recession-resistant company that at purchase was trading at a discount from our estimates of intrinsic value. The following characteristics made it appealing: consistent earnings pattern even during recession years; high free cash flow; a dividend yield of approximately 4.5%; a history of dividend increases every year since 1999; a history of buying back its own shares; growing volume in key global brands; brand loyalty; and a wide competitive moat.
Royal Dutch Shell (RDSA:NA), the giant Dutch oil and gas company is, in our mind, one of the cheapest of the oil and gas majors, and has one of the best production growth profiles. Royal Dutch is benefiting today from investments they made in development projects over the last several years, and this should drive increases in cash flow in the near future. They have also significantly cut costs associated with their refining operations which should help to improve margins. At purchase, it was trading at roughly nine times earnings, and had a 5.0% dividend yield.
Cisco Systems (CSCO, Financial) provides routing, data and networking products for the Internet. The company’s clients include corporations, public institutions and telecommunications companies worldwide. Cisco is financially strong and we think statistically cheap. It has a dominant market position and has been growing within a category that we believe still has a lot of room for future growth. Perceived competitive threats and concerns about possible slower rates of growth have put pressure on Cisco’s stock price, which has allowed us an entry point in the stock that we believe is at roughly a one-third discount from a conservative estimate of the company’s intrinsic value.
The full letter can be viewed in Scribd:
Tweedy Browne FundCommentaryQ12011
Disclosure: Long CSCO
http://www.valuewalk.com/
G4S Plc (GFS:LN), based in the UK, is the world’s leading international security group offering security services in a number of categories including security guards, alarms, prison management, cash and valuables transportation, among others. It generates high free-cash flow, has significant exposure to faster growing emerging markets, has paid a dividend yield north of 3%, and trades at a discount from estimated intrinsic value. It is one of the few security companies that can handle the diverse and often global needs of large corporations and governments.
British American Tobacco (BATS:LN) is the third largest tobacco company in the world. It operates in 180 markets and has 250 brands. It also has a 42% position in Reynolds American (RAI, Financial), the second leading U.S. tobacco manufacturer, and a 31% stake in ITC Ltd. (ITC:IN), the leading cigarette manufacturer in India.
BAT is a high-return-on-capital recession-resistant company that at purchase was trading at a discount from our estimates of intrinsic value. The following characteristics made it appealing: consistent earnings pattern even during recession years; high free cash flow; a dividend yield of approximately 4.5%; a history of dividend increases every year since 1999; a history of buying back its own shares; growing volume in key global brands; brand loyalty; and a wide competitive moat.
Royal Dutch Shell (RDSA:NA), the giant Dutch oil and gas company is, in our mind, one of the cheapest of the oil and gas majors, and has one of the best production growth profiles. Royal Dutch is benefiting today from investments they made in development projects over the last several years, and this should drive increases in cash flow in the near future. They have also significantly cut costs associated with their refining operations which should help to improve margins. At purchase, it was trading at roughly nine times earnings, and had a 5.0% dividend yield.
Cisco Systems (CSCO, Financial) provides routing, data and networking products for the Internet. The company’s clients include corporations, public institutions and telecommunications companies worldwide. Cisco is financially strong and we think statistically cheap. It has a dominant market position and has been growing within a category that we believe still has a lot of room for future growth. Perceived competitive threats and concerns about possible slower rates of growth have put pressure on Cisco’s stock price, which has allowed us an entry point in the stock that we believe is at roughly a one-third discount from a conservative estimate of the company’s intrinsic value.
The full letter can be viewed in Scribd:
Tweedy Browne FundCommentaryQ12011
Disclosure: Long CSCO
http://www.valuewalk.com/
