Brian Rogers of T. Rowe Price Top Q2 Holdings: CVX, JPM, GE, XOM
From his second-quarter management commentary “Portfolio Hightlights:” We prefer to invest in a mix of regulated and unregulated utilities with quality assets that operate in attractive markets, and we like the stable cash flows and higher dividend yields that utilities stocks tend to provide. During the quarter, we were net sellers in this traditionally defensive sector on strength as investors fled to more risk-averse names. During the quarter we also were net purchasers of technology stocks as valuations became compelling.
Rogers, like several famed investors, is also a fan of financial stocks currently, as he believes they have attractive valuations after the sector lagged significantly in the global financial crisis. Financial stocks compose 19.2% of his portfolio as of June 30, 2011.
His fund is up 1.84% year to date, and has an average annual total return of 27.28% for the trailing 12 months ended June 30, 2011.
His top holdings in the second quarter of 2011 are: Chevron (CVX), JP Morgan Chase (JPM), General Electric Co. (GE) and Exxon Mobil Corp. (XOM).
Chevron is the fifth-largest integrated energy company in the world. Chevron has a market cap of $211.14 billion; its shares were traded at around $105.03 with a P/E ratio of 10.2 and P/S ratio of 1.1. The dividend yield of Chevron stocks is 3%. Chevron had an annual average earnings growth of 14.3% over the past 10 years. GuruFocus rated Chevron the business predictability rank of 2.5-star.
Historically, Chevron’s stock has loosely followed the price of oil, but within the last month, Chevron stock has outpaced oil, gaining 13.99% compared to oil’s 8.36% increase. The jump could have to do with the 43% year over year increase in quarterly profit to $7.7 billion or $3.85 per diluted share, resulting in large part by the highest oil prices in three years. Return on capital was over 19% for the trailing 12 months and the debt ratio at June’s end was 9.1%. The company also repurchased $1 billion worth of company shares.
The company has employed its $11 billion second quarter cash from operations to raise its second quarter dividend 8%, fund a strong capital program and make a few small acquisitions, which the company hopes will drive future growth and returns, as management related on its second-quarter conference call.
Brian Rogers owns 5,866,000 shares of Chevron. He has been selling small quantities in most quarters since the second quarter 2009 as the stock price increased.
JP Morgan Chase (JPM)
J.P. Morgan Chase & Co. is a global financial services firm. Jp Morgan Chase has a market cap of $161.65 billion; its shares were traded at around $40.68 with a P/E ratio of 8.6 and P/S ratio of 1.6. The dividend yield of Jp Morgan Chase stocks is 2.4%.
JP Morgan stock has fallen 4.64% year to date, particularly as the debt ceiling deadline approaches with no resolution in sight. Otherwise, JP Morgan has had cash flow issues – it went from free cash flow of $122 billion in 2009 to a cash flow loss of $3.8 billion in 2010. In the trailing 12 months ended March 31, 2011, it has lost cash flow of $28.9 billion. However, its half-year $11 billion profit was its highest ever.
CEO of JP Morgan, James Dimon, along with CEOs of 13 other major banks, sent a letter to congress on Thursday urging them to reach an agreement on the debt ceiling in order to prevent negative ramifications for the financial sector and the economy at large.
“We write to you today to urge you to act this week to reach an agreement that will ensure that our Nation continues to meet all of its financial obligations, and that will entail meaningful and concrete steps to put our Nation on a sound fiscal footing,” the letter states. “The consequences of inaction – for our economy, the already struggling job market, the financial circumstances of American businesses and families, and for America’s global economic leadership – would be very grave.
Our economic recovery remains very fragile. A default on our Nation’s obligations, or a downgrade of America’s credit rating, would be a tremendous blow to business and investor confidence – raising interest rates for everyone who borrows, undermining the value of the Dollar, and roiling stock and bond markets – and, therefore, dramatically worsening our Nation’s already difficult economic circumstances. “
Rogers has sold small portions of JP Morgan stock periodically as well, but purchased 450,000 shares in the second quarter of 2011 at an average price of $43.29.
General Electric Co. (GE)
Thomas Edison-founded General Electric is one of the largest and most diversified industrial corporations in the world. General Electric Co. has a market cap of $192.07 billion; its shares were traded at around $18.11 with a P/E ratio of 14.1 and P/S ratio of 1.3. The dividend yield of General Electric Co. stocks is 3.4%. General Electric Co. had an annual average earnings growth of 13.1% over the past 10 years.
GE has been a member of the “Dogs of the Dow” list – the 10 cheapest stocks on the Dow Jones Industrial Average Index with the highest dividend yield and lowest expected price earnings ratio – for July.
The company has also reduced its dividend per share every year since 2008 – from $1.24 to 42 cents in 2010, its lowest payout since 1998. GuruFocus writer Chuck Carneval has an excellent piece on developments of note for income investors here.
In the second quarter, GE announced its fifth consecutive quarter of double-digit earnings growth, while revenues declined 4% to $35.6 billion from a year ago, mainly due to the loss of NBCU revenues after the company sold their majority stake to Comcast (CMCSA). To perpetuate growth, GE invested increased its investment in R&D 40% above a year ago.
Rogers initiated his stake in GE in the first quarter of 2007 with 20,000,000 shares at an average price of $35.93 per share. He has bought and sold on and off since then, and purchased another 1,250,000 shares in the second quarter at an average price of $19.49 per share, bringing his total holding to 29,636,500 shares.
Exxon Mobil (XOM)
Exxon Mobil Corporation's principal business is energy, involving exploration for, and production of, crude oil and natural gas, manufacturing of petroleum products and transportation and sale of crude oil, natural gas and petroleum products. Exxon Mobil Corp. has a market cap of $401.28 billion; its shares were traded at around $81.46 with a P/E ratio of 11.5 and P/S ratio of 1.1. The dividend yield of Exxon Mobil Corp. stocks is 2.2%. Exxon Mobil Corp. had an annual average earnings growth of 9.1% over the past 10 years.
Exxon Mobil is a member of the Dow Jones Industrials and the dividend aristocrats indexes. It has paid uninterrupted dividends on its common stock since 1882, increasing payments every year for the last 28 years.
The company’s cash flow fell to $6 billion in 2009, from $40.4 billion in 2008. In raised its cash flow to $21.5 billion in 2010. Exxon has $162 billion in long-term liabilities and debt compared to $13.2 billion in cash on its balance sheet as of March 31, 2011.
Exxon reported its second-quarter and half-year financial results on Thursday. It had raised earnings 54% in the first half of the year, from $13.7 billion in 2010 to $21.3 billion in 2011, like Chevron, primarily due to crude oil price hikes, among other factors. It also put a record $10.3 billion toward capital and exploration expenditures in the second quarter, up 58% from a year ago.
Analysts report that the cost of gas could continue to travel upward 20 or 30 cents per gallon by the end of the year as demand from China grows, The Street reports.
For the rest of Brian Rogers’ portfolio, click here.