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Stocks That Jean-Marie Eveillard Keep Buying in Recent Quarters

Mara Kohn

Mara Kohn

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Jean-Marie Eveillard is chief investment officer of the Arnhold and S. Bleichroeder Advisers LLC Global Value Team and portfolio manager of First Eagle Global, Overseas, Gold, U.S. Value and Overseas Variable Funds.

Under the leadership of Eveillard, the firm avoided deep losses in 2008. First Eagle Investment Management LLC owns 351 stocks with a total value of $19.9 billion.

Eveillard is a value-oriented investor. His approach to asset management is defined by the conviction that absolute long-term performance is the best way to preserve capital, rather than attempting to compete against the short-term movements of the major indices, and rigorous application of bottom-up fundamental analysis intended to reduce risk. His strategy incorporates on-site research by actively visiting companies and talking to managers to gain rounded, first-hand knowledge of investment prospects. Eveillard buys securities whose intrinsic value and long-term potential outweighs market risk.

Some of his latest pickups include:

Cisco Systems Inc: Cisco Systems is the world's leading supplier of data networking equipment and software. Its products include routers, switches, access equipment and network-management software that allow data communication among dispersed computer networks. The firm has also entered newer markets, such as video conferencing, web-based collaboration and data center servers.

Cisco's balance sheet is extremely healthy, with far more cash than debt, and free cash flows average of more than 20% of revenue over the past several years. Cisco generated double-digit year-over-year order growth across each of its key customer segments and geographies.

As Internet traffic grows, demand for Cisco's networking gear will grow too. UCS servers are showing early signs of success. Although they now have relatively low gross margins, these servers will potentially expand Cisco's footprint in its customers' data centers.

Cisco's current share price assumes inflationary growth and 8 points of margin deterioration over time. With nearly $5 per share in net cash and nearly $1.50 per share in normalized free cash flow, downside risk is limited at current levels.

FirstEnergy Corp. (FE): FirstEnergy owns 10 regulated electric utilities serving 6 million customers in five Mid-Atlantic states. It owns one of the largest competitive generation fleets in the U.S. with 20 gigawatts of nuclear, coal, gas, and renewable power capacity. Its FirstEnergy Solutions retail business supplies more than 90 terawatt hours of electricity to customers primarily in the Mid-Atlantic region. Its regulated transmission utility owns nearly 20,000 miles of wires mostly in the Eastern U.S.

Its leverage and coverage ratios are in line with its diversified utility peers. Its projected 65% payout ratio for 2011 and 2012 is steep for its business mix.

FirstEnergy's low-cost nuclear and coal-fired power plants, which make up 94% of the company's generation production, remain a key competitive advantage in the cost-sensitive utility industry. Its utilities operate in stable and constructive regulatory environments with a diverse customer base that can offset exposure to economically sensitive usage swings.

It has been noted that matching its growing retail business with its large wholesale generation fleet should offer competitive advantages and smooth earnings in volatile markets.

Sysco Corporation (SYY): Sysco operates as the largest North American food-service distributor, controlling 17% of the market. The firm distributes more than 400,000 food and nonfood products to 400,000 customers, including restaurants, health-care and educational facilities, and lodging establishments.

At the end of fiscal 2011, total debt/capital amounted to around 0.4, and operating income covered interest expense more than 16 times. During the next five years, debt/capital is expected to stay about flat relative to fiscal 2011 and earnings before interest and taxes to cover interest expense nearly 15 times.

Thr firm holds a diversified customer base, as no single customer accounts for more than 10% of Sysco's consolidated sales.

Grupo Televisa S.A. (TV): Grupo Televisa is the largest media company in the Spanish-speaking world. Besides operating broadcast channels in Mexico, the company produces pay-television channels whose content reaches subscribers in North America, Asia, Europe, and Latin America. Televisa also owns interests in satellite television, cable TV, terrestrial radio, magazine publishing, Mexican bingo parlors and three of Mexico's professional soccer teams.

The company's solid record of cash generation has enabled it to pay annual cash distributions and extraordinary dividends to shareholders since 2004. Popular telenovelas are proven hits in Mexico and in other international markets like the U.S., China and Brazil.

Least but not last, the company’s investment in Univision (UVN) and lucrative royalty agreement in exchange for its programming gives Televisa exposure to the world’s largest media market.

Microsoft Corporation (MSFT): Microsoft develops the Windows PC operating system, the Office suite of productivity software, and enterprise server products such as Windows Server and SQL Server. The Windows PC and Office franchises collectively account for nearly 60% of the firm's revenue, and the server and tools business contributes with 24%. The firm's other businesses include the Xbox 360 video game console, Bing Internet search, business software, and software for mobile devices.

Microsoft has a solid balance sheet, with more than $50 billion in cash and cash equivalents, and about $12 billion in debt. The company is expected to generate more than $20 billion in free cash flow annually, allowing it to comfortably service the debt while continuing to invest in expanding the business.

Microsoft's partnership with Nokia (NOK) will drive large market share gains for the Windows Phone platform and create the next $1 billion-plus annual revenue stream for the company. Market share gains will turn the online services division into a profit contributor over the next five years.

Ken Sena of Evercore Partners has reached the following conclusion: “Eveillard's long-term approach that has enabled the company to make good pickups is very interesting. I think that Eveillard´s company is superb and its strategy is worth following.”

Rating: 3.0/5 (10 votes)

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