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Stocks That Julian Robertson Keeps Buying

December 23, 2011 | About:
Mara Kohn

Mara Kohn

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Julian H. Robertson Jr. is an American former hedge fund manager. He started working at Peabody & Co. in New York in 1957 and, over a 20-year career, became one of the firm's top-producing stockbrokers. Then, he founded the investment firm Tiger Management Corp., one of the earliest hedge funds, in 1980 with $8 million start-up capital that became over $22 billion in the late 1990s.

Now retired, Robertson invests directly in other hedge funds, most run by former employees of Robertson's defunct hedge fund company. He is active in philanthropy and supporting the resolution of environmental issues.

Looking back to Tiger Management Corp., the company had had year after year brilliant returns of $8 million in 1980 that turned into $7.2 billion in 1996.

Robertson was the reigning titan of the world's hedge funds.

Unfortunately, Tiger was gradually closed down from 1998 to 2000, when all its funds were closed. This demise was evidenced by the plunge in assets under management from a peak of $22 billion in 1998 to a closing value of $6 billion.

After closing his fund in 2000, Robertson kept his hand in the hedge fund business by supporting and financing upcoming hedge fund managers, in return for a stake in their fund management companies.

At an interview given a few years ago, he talked about his mandate: “Our mandate is to find the 200 best companies in the world and invest in them, and find the 200 worst companies in the world and go short on them. If the 200 best don't do better than the 200 worst, you should probably be in another business."

His investment style, about which there is very little written, consisted of a "smart idea, grounded on exhaustive research, followed by a big bet." Not exactly a practical framework that would work for the general investing public.

The stocks that he has been buying in the last months include:

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 aspect. 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.

WuXi PharmaTech (WX): WuXi PharmaTech provides drug-development outsourcing to pharmaceutical and biotechnology firms. Before 2008, the company focused primarily on preclinical services such as discovery chemistry and toxicology. But it has recently added a presence in biologics testing and manufacturing.

The company's revenue is split between two segments: laboratory and manufacturing services.

The company ended the third quarter with more than $200 million in cash and only $66 million in debt on its balance sheet. It announced a solid 24% growth in revenues during 2010, and a further 20% increase in its top-line for 2011. During 2010, WuXi’s sales totaled $334.1 million. The company predicts it’ll reach around $400 million in the years to come.

In addition, WuXi is the leading contract research organization in the booming Chinese market, allowing it to doubly benefit from an increase in drug-development outsourcing and a greater trend toward offshoring of R&D services.

WuXi has a reputation for excellent quality, service and protection of customer intellectual property.

The Goldman Sachs Group Inc. (GS)Goldman Sachs is a global investment banking firm whose activities are organized into investment banking, institutional client services, investing & lending, and investment management segments. The firm recently reorganized itself as a financial holding company regulated by the Federal Reserve.

Even if its structure has changed, Goldman still has the same capable management and employees that enabled it to outperform in recent years. Increased returns on assets may offset the decrease in leverage. Several of the company's primary U.S.-based competitors have been forced to restructure, and this could give Goldman an opportunity to gain market share.

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.

Cablevision Systems A (CVC): Cablevision is one of the largest multimedia companies in the United States. Its slimmed-down operations now span two distinct segments: A cable TV and high-speed data business and Newsday, a daily newspaper serving Long Island, acquired from The Tribune Company in 2008. The cable footprint passes more than 5 million households and businesses with its state-of-the-art fiber rich network.

Since 2009 the firm has done a good job of lengthening its debt maturity schedule. Through the first half of 2011, the firm grew its free cash flow per share by 38% on a pro forma basis. Net revenue in its core telecommunications business rose by 9% year over year to $1.56 billion

The company's primary service footprint is in the densely populated New York City Metroplex, whose technologically progressive and wealthy population is receptive to its premium data and video offerings.

Even as its markets continue to mature, the firm continues to increase its cable ARPU at an accelerated rate. Management raised its dividend twice in the last two years, and is in the midst of a billion dollar buyback initiative.

Rating: 3.6/5 (8 votes)

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