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Top 5 Conviction Picks from Glenn Greenberg

December 21, 2011 | About:
Mara Kohn

Mara Kohn

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Glenn Greenberg and partner John Shapiro founded Chieftain Capital Management in 1984. Now they divided into two separate entities. Mr. Shapiro and two Chieftain partners, Tom Stern and Joshua Slocum, launched a new investment firm in 2010 that will keep the name Chieftain Capital Management.

The existing Chieftain will be renamed Brave Warrior Advisors and will be run by Mr. Greenberg.

Glenn Greenberg maintains a highly concentrated portfolio that he describes as a "defense against ignorance." He believes that the more companies you own, the less you will know about each, and the less you know about a business, the more likely you are to make mistakes due to fear and greed. He has always put his thoughts into practice. Indeed, he usually owns less than 10 stocks. Greenberg invests in companies with little competition, and places a great deal of emphasis on Return on Invested Capital.

His last five investments have been the following:

Google Inc. (GOOG) Google manages an Internet search engine that generates revenue when users click or view advertising related to their searches. This activity accounts for more than 80% of the company's revenues. The remaining revenue comes from advertising that Google places on other companies' websites.

Google's balance sheet is made up of almost $35 billion in net cash and about $4.2 billion in short-term debt and long-term debt.

Management expects larger increases in online ad spending thanks to a more effective branding advertising.

Google definitely holds new and significant opportunities for growth.

Valeant Pharmaceuticals International Inc. (VRX): Valeant Pharmaceuticals is a specialty pharmaceutical firm focused on dermatology and neurology in the United States, Canada, and New Zealand. The firm also has a branded generics business that operates in Latin America and Central and Eastern Europe.

Valeant is well-positioned to benefit from the rising incomes and growing demand for health care in Latin America and Central Europe.

Fiserv Inc. (FISV) is a leading provider of core processing and complementary services, such as electronic funds transfer and loan processing, for U.S. banks and credit unions. . Fiserv serves 16,000 clients, with a focus on its legacy business with small and midsize banks.

In the last quarter, it delivered 12% growth in adjusted earnings per share to a record $1.16 in the quarter. Given its strong performance to date and visibility into the fourth quarter, they are raising its full year EPS guidance to $4.54 to $4.60.

Fiserv spins off a good amount of free cash flow. Thanks to high retention rates and long-term contracts, Fiserv's core processing relationships are a stable source of revenue.

Aon Corp. (AON) Aon provides insurance brokerage and related risk and human resources consulting services worldwide. With more than 36,000 employees serving customers in more than 100 countries, Aon has developed a global footprint for insurance buyers as well as providers, and is a leader in its industry.

In terms of quarter results, it reported revenue growth of 51% y/y. Weak insurance pricing has weighed on the company's results in recent years, but prices appear to have stabilized.

Aon's corporate revival was led by new, younger leaders with a vested stake in seeing that Aon not only defends but builds on its improved competitive position.

Motorola Solutions Inc. (MMI) has two main businesses. First, at 65% of revenue, is its public safety business, which sells two-way radios and supporting infrastructure and services, primarily to government agencies. The remaining 35% of revenue comes from enterprise customers, to whom it sells hand-held scanners, tablets, RFID equipment, WLAN base stations, and similar products that allow customers to manage inventories and supply chains. Key vertical markets for this business include retail and transportation.

Motorola has reported total cash of $6.65 billion, and net of long-term debt, $4.5 billion. Motorola Solutions' balance sheet has improved.

Although Motorola Solutions has only existed as a stand-alone entity since early 2011, the business unit that became Motorola Solutions has a long track record as a reported segment from the predecessor company.

Given its history of slow, steady growth and its low capital requirements, Motorola Solutions could eventually institute a dividend once it hits specific goals for its balance sheet.

Rating: 3.0/5 (8 votes)

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