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Top Buys in the Last Quarter from John Griffin

Mara Kohn

Mara Kohn

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John Griffin is the president of Blue Ridge Capital, an investment partnership that he founded in 1996. Mr. Griffin was known as legendary investor Julian Robertson's right hand man.

He is also adjunct professor of finance at Columbia Business School and a visiting professor at the University of Virginia. He began his career as a financial analyst for Morgan Stanley Merchant Banking Group before moving on to Tiger Management, where he became president in 1993.

As regards Blue Ridge in particular, the company seeks absolute returns by investing in companies that dominate their industries and shorting companies having fundamental problems. The firm employs fundamental analysis to make its investments.

John Griffin upholds long-short strategies and has no positions in macro outlook as the long positions protect his portfolio in down market. By the end of 2011, Blue Ridge Capital owns 53 stocks with a total value of $4.9 billion.

Below, there appears Griffin's top buys.

Monsanto Company (MON): Monsanto, formerly a chemical company, has turned into an agricultural giant, focusing on seeds and crop protection products. Monsanto introduced the first genetically modified crop seeds in 1996 and has remained the industry leader.

The St. Louis-based company generated $10.5 billion in sales during fiscal 2010, and is focused on bringing new biotechnology traits to market to improve farmer yields and productivity.

Monsanto has a very healthy balance sheet with zero net debt. Indeed, the firm is a strong cash flow generator.

The Food and Agriculture Organization of the United Nations projects should spur demand for Monsanto's yield-improving technologies.

Furthermore, large global breeding operation gives Monsanto access to a massive germplasm bank across six continents, giving the firm the tools to tailor seeds to regions worldwide.

Liberty Global Inc. A (LBTYA) owns cable networks and a couple of small satellite operations in the Netherlands, Switzerland, Austria, Belgium, Germany, Ireland, Hungary, Romania, Poland, the Czech Republic, Slovakia, Australia, Chile, and Puerto Rico. Over the past few years, the firm has sold assets in Sweden, France, Norway, Brazil, Peru, Slovenia, and most recently Japan; increased its stakes in Belgium and Australia; and acquired Swiss, Irish, Romanian, and German operations.

It also offers high-speed Internet access and fixed-line telephony in most of these markets.

In terms of third-quarter results, they have been solid. Revenue increased 16.1% from the year-ago period. Although the company has lost nearly 60,000 television customers, this loss has been offset by the incorporation of 192,000 broadband customers and 193,000 telephone subscribers. The firm is successfully cross-selling its offerings, as 39% of Liberty Global’s customer base now subscribe to at least two services and 24% subscribe to three services.

Many of the systems it owns enjoy penetration rates that are among the best in the world.

Management's deep experience should add value for shareholders over time and the company is on the right track in this respect. Liberty bought back $1.8 billion worth of stock in 2006, $1.9 billion in 2007, and a further $2.2 billion in 2008. Despite concerns about its debt load, the firm bought an additional $407 million of its stock during 2009 and $891 million in 2010. It has another buy back approved for $1 billion in 2011.

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's meteoric rise in smart-phone market share through the Android platform should help to extend its competitive advantages into the mobile world.

Google definitely holds new and significant opportunities for growth.

Sensata Technologies Holding B.V. (ST)is a supplier of sensing, electrical protection, control and power management solutions. The Company produces a range of sensors and controls for mission critical applications, such as thermal circuit breakers in aircraft, pressure sensors in automotive systems, and bimetal current and temperature control devices in electric motors.

It develops solutions for specific customer requirements or applications across automotive, appliance, aircraft, industrial, military, heavy vehicle, heating, air-conditioning, data, telecommunications, recreational vehicle and marine applications. Products are customized for clients in various end markets.

Regarding quarterly results, free cash flow has improved thanks to cost-cutting efforts, and the company expects to drive double-digit organic growth as a result of a continued rebound in the auto/industrial sectors, increased demand for safety and efficiency in its verticals as well as its strategic presence in emerging markets.

Sensata has two features that make it rather unique: a sustainable or defendable competitive position which enables it to have the No. 1 position in 80% of its global markets and prevents competitors from spreading and strong free cash flow.

In terms of free cash flow, ST generates high returns on its assets and is not very capital intensive. ST has been able to maintain a high level of cash flow due to its exceptionally low cash tax rate of approximately 5-7% of adjusted earnings before interest and taxes (EBIT).

Priceline.com Inc. (PCLN) This online travel aggregator offers booking services for hotel rooms, airline tickets, rental cars, cruises, and other vacation packages. The company operates under the Priceline.com name in the United States, Booking.com in Europe, and Agoda in Asia. It has recently acquired TravelJigsaw to expand its global footprint in car rental. In addition, it has incorporated Australia and New Zealand on its business-growth road map.

Priceline had $2.4 billion in cash and short-term investments at the end of September 2011 and about $575 million in senior convertible debt due 2015. Priceline plans to reinvest the cash overseas in international operations.

Considerable operating leverage in the online travel business has enabled Priceline to expand EBITDA at an impressive annual rate of 71% over the past several years; this trend is expected to continue in the near future.

Rating: 2.8/5 (10 votes)

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