Walt Disney (DIS)
Six gurus bought Disney stock in the third quarter, bringing the total number of gurus who own the stock to eight. Gurus that bought or added the stock are: Mason Hawkins, Arnold Van Den Berg, Wallace Weitz, Tom Gayner, Bill Nygren and Chris Davis. No Gurus sold the stock in the quarter.
Disney has grown revenue at a 5.1% rate in the last five years, and cash flow at 6.7%. For fiscal 2011, its operating and net margins expanded, driven by R&A pricing and higher ticket prices, as well as a strong response to its new cruise ship.
Several factors should position the company for continued growth in the future, namely, new resorts, an international footprint, and new technology platforms. The newest resort, Shanghai Disney, is slated to open in 2016, will cover 963 million acres, and will be 43% owned by Disney and 57% owned by a Chinese state-owned entity. Shanghai Disney is one of the company’s three large international deals. It also plans to acquire the portion of Indian media company UTV Software Communications Ltd. that it does not already own, and launch a Disney Channel in Russia.
“It is imperative to plant a number of seeds in the emerging world over the next decade. Growth from emerging markets is going to outpace the Western world, for the first time in 200 years,” said Bob Iger, Disney CEO.
To reach a broader audience, Disney plans to better monetize and expand its use of new media platforms, such as Netflex (NFLX), Amazon (AMZ), smart phone apps, ESPN.COM, Facebook and YouTube.
Iger commented on the fourth quarter conference call that his strategic priority from 2005 remains in place: to make a great product. Technology has become a major priority in distributing a quality product more effectively.
Five Gurus bought or added Google stock in the third quarter: Julian Robertson, Ken Heebner, Glen Greenberg, David Winters and Wallace Weitz. No Gurus sold.
Google Inc. has increased its revenue at a five-year annual rate of 33%, its EBITDA at 54.2% and its free cash flow at 11%. GuruFocus valuation charts show that the mega internet company is near historical-low P/E, P/S and P/B ratios, possibly attracting value investors.
Through the month of September, Google stock was significantly cheaper, though from October to mid-November its price has been trending upward on positive financial results for the third quarter. Google reported a 33% year over year increase and earnings per share of $8.33 on 327 diluted shares outstanding, compared to $6.72 on 322 million diluted shares outstanding in the third quarter of 2010. The company currently has $42.6 billion in cash, cash equivalents and short-term marketable securities on its balance sheet.
Four Gurus purchased IngersollRand in the third quarter: Mason Hawkins, Richard Snow, Brian Rogers and Kenneth Fisher.
Ingersoll Rand has in recent years transformed itself from a heavy-machinery company into an international, multi-brand commercial products manufacturer. It makes Club Car golf cars, Ingersoll Rand industrial equipment, Schlage locks, Thermo King transport temperature-control equipment and Trane air conditioning systems and services.
In the third quarter, Ingersoll Rand’s revenues increased 5%, to $3.9 billion, compared with 2010, orders increased by 4% year over year, and EPS of $0.81 exceeded the revised guidance range. Earnings for the quarter, however, fell 63%, mainly due to an asset impairment charge and a decline in U.S. sales, and operating margin fell to 4.6% from 11%. Its largest challenges to sales were its heating and ventilation air conditioning (HVAC), security and gold businesses.
Ingersoll Rand derives 63% of its revenue from North America, but its China market grew the most at 27% for 2011. It has a $1 billion cash flow target for 2011, which will fund its planned buyback of 35 million shares in 2011. For 2011, it increased its dividend 71%.
The company reduced its dividend to 7 cents in 2009 from 18 cents. In June 2011, it raised the amount to 12 cents.
Murphy Corp. (MUR)
Three gurus bought or added Murphy Corp. stock in the third quarter of 2011: Mason Hawkins, David Williams, Brian Rogers and James Barrow. No Gurus sold.
Murphy Corp. is an international oil and gas company with several subsidiaries that engages in worldwide exploration. Under the name Murphy USA, it operates high-volume, low-cost retail gasoline stations in 23 states, primarily in the parking areas of Walmart Supercenters.
From 2008 to 2009, Murphy Corp.’s had drastically diminished financial results. Revenues fell 58% and net income fell 52%, though it increased its dividends paid 15%. It has made some progress recovering from the dip; from 2009 to 2010, revenues increased 23%, though net income fell a further 5% due to a nonrecurring gain on disposal of Ecuador operations. Dividends paid increased another 6%.
For 2010, its worldwide crude oil, condensate and natural gas liquids production decreased 4% compared to 2009, due primarily to lower 2010 oil production in one of its drilling locations, Kikeh field in offshore Sabah Malaysia. The company expects total production in 2011 to increase between 7% and 13%, primarily due to natural gas production in its new Tupper West area in Western Canada which began in February 2011.
For the most recent third quarter, the company reaped doubled income due to higher crude and gas liquids.
With a strong balance sheet and debt-to-capital-employed ratio of 10.3% at the end of 2010, Murphy Corp. says it has the capability to invest in value-added opportunities or manage a significant development project.
XL Group (XL)
Four Gurus bought or added XL stock in the third quarter: Donald Smith, Richard Snow, James Barrow and Leon Cooperman. No Gurus sold. Barrow, Hanley, MeWhinney & Strauss Inc. is the second-largest investor in XL; Paulson & Co. is the largest.
XL Group plc, through its subsidiaries, is a global insurance and reinsurance company providing property, casualty, and specialty products to industrial, commercial, and professional firms, insurance companies and other enterprises on a worldwide basis.
XL’s revenue fell every year from 2005 to 2009, and eked up from $6.2 billion in 2009 to $6.4 billion in 2010. Free cash flow, which exceeded the billion mark for most of the decade, was negative in 2008 and 2009, improving in 2010 to $595 million. Book value per share improved the last three years, but at $33.06 in 2010 has not returned to 2007 levels to $55.78.
For its third quarter, XL Group saw third-quarter profit fall 42% year over year due primarily to rising claims and investment losses. It lost $110.6 million due to natural catastrophes, net of reinsurance and reinstatement premiums. Total revenue increased 2%. The company also bought back 15.1 million shares and wrote 16.4% more gross P&C premiums than the prior year quarter.
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