Arnold Van Den Berg’s first quarter portfolio is striking because he reduced almost all of his holdings. He also sold out seven stocks, bought two new ones and increased five. His pull back from the market was foreshadowed in an interview in December: “We wait for opportunity in bonds or fixed income and do the same thing in stocks. We are 18% cash right now, if market moves up, we might end up to be 30-35% cash. If it goes lower, we would put that money to work. Future return is most important thing,” he said.
Van Den Berg’s team has also found that most of their large-cap, dividend-paying stocks have come close to the upper ends of their valuation. As die-hard value investors, they would sell stocks that become too expensive.
Rather, while many tout the record profits of corporations, they believe many smaller companies have only just begun to come off the bottom, are mid-cycle and will not reach another earnings peak for five or so years. They have been looking for companies with great balance sheets, not more than 26% debt to capital and with more cash than debt. Many of these stocks trade for near book value because they have not been making a lot of money.
Van Den Berg’s only two new stocks he bought for his portfolio are: Newmont Mining (NEM, Financial) and Tesco Plc ADR (TSCDY, Financial). His largest position increases were Vishay Precision (VPG, Financial) and Orion Marine Group (ORN, Financial).
Newmont Mining (NEM)
Van Den Berg bought 483,691 of Newmont Mining in the first quarter. Year to date, the stock price has declined almost 18% to $49.20, from a 52-week high of $72.42.
Newmont Mining Corp. is engaged in the production of gold, the exploration for gold and the acquisition and development of gold properties worldwide. Newmont Mining has a market cap of $23.4 billion and a P/E ratio of 10.9 and P/S ratio of 2.3. The dividend yield of Newmont Mining stocks is 2.9%. Newmont Mining had an annual average earnings growth of 12.7% over the past 10 years. GuruFocus rated Newmont Mining the business predictability rank of 2.5-star.
Newmont’s stock price became depressed in the fourth quarter on disappointing earnings results. Though the company had earned $2.3 billion in 2010 and $366 million in 2011, it lost $1 billion in the fourth quarter, declined from earnings of $812 million in the prior year quarter. Revenue had also been increasing annually since 2006, and was $2.8 billion in 2011, compared to $2.6 billion the prior year quarter.
Van Den Berg looks for stocks with strong free cash flow, which Newmont has had since 2009, along with $2.5 billion in cash and $7.8 billion in long-term liabilities and debt.
Tesco Plc ADR (TSCDY)
Van Den Berg bought 199,350 shares of Tesco Plc in the fourth quarter. He was able to purchase shares after the stock dropped almost 20% to a 52-week low in the first quarter primarily due to a profit warning.
Tesco Plc is the UK's largest retailer and one of the world's international retailers. Tesco has a market cap of $41.72 billion; its shares were traded at around $15.16 with and P/S ratio of 0.4. The dividend yield of Tesco Plc stocks is 4.3%. Tesco had an annual average earnings growth of 4% over the past five years.
Tesco issued a profit warning in January that said a challenging consumer environment in the UK and early signs of more cautious behavior internationally had placed a strain on its profitability during the holiday period. It told investors to expect Group trading profit growth to be near the low end of the current market consensus forecast range. The company’s results were particularly affected by its significant price cuts during the holiday period, which were not offset by increased volume sales.
Vishay Precision (VPG)
The largest increase Van Den Berg made to a holding was Vishay Precision. He added 625,605 shares in the first quarter to the 37,000 shares he bought in the third quarter of 2011 at approximately $15 per share. At quarter end he had a total of 662,605 shares, or 5.38% of the company. Vishay dropped approximately 12.5% in the first quarter.
Vishay Precision Group Inc. is a designer, manufacturer and marketer of resistive foil technology products such as resistive sensors, weighing modules and control systems for a wide variety of applications. Vishay Precision has a market cap of $178.9 million; its shares were traded at around $13.98 with a P/E ratio of 18.4 and P/S ratio of 0.8.
Having joined the NYSE in June 2010, Vishay has only two years of public earnings records (previously, it was part of Vishay Intertechnology Inc. (VSH, Financial). They show that revenue increased from $208 million in 2010 to $238 million in 2011, while earnings declined from $11.7 million to $10.8 million in 2011. The company has $115 million in cash and $34.9 million in long-term liabilities and debt.
Van Den Berg got the stock for approximately $15, near its 2011 book value of $15.01. It is currently trading at $13.98 per share, a discount to book value.
Orion Marine Group Inc. (ORN)
Van Den Berg had been buying shares of Orion Marine Group in the second and third quarters of 2011, then bought 624,715 shares in the first quarter of 2012. At quarter end he owned a total of 988,665 shares, or 3.65% of the company.
Though the stock price declined almost 33% over the last year, it increased almost 7% year to date. Currently it is trading around $7.1 per share, a discount to book value of $8.61.
Orion Marine Group Inc. provides a broad range of marine construction and specialty services on, over and under the water along the Gulf Coast, the Atlantic Seaboard and the Caribbean Basin and acts as a single-source turnkey solution for its customers' marine contracting needs. Orion Marine Group has a market cap of $196.9 million with and P/S ratio of 0.8.
After four years of annual revenue increases, Onion Marine’s revenue dipped from $353 million in 2010 to $260 million in 2011. Net income of $21.88 million swung to a loss of $13.11. The company has generated free cash flow in four of the last five years, which reached $18.6 million in 2011. The company has $80.1 million in cash on its balance sheet and $22.1 million in long-term liabilities.
On March 23, Orion said it expects its margins to be under pressure due to weak economic growth and delays in federal spending in the first half of 2012. It also expects first quarter bottom line results to be significantly less than in the fourth quarter of 2011. "The company does not expect the start of recently awarded projects to materially begin until the third and fourth quarter of 2012," Orion Marine said in a statement.
Van Den Berg is clearly looking for smaller-cap companies trading near book value and does not mind holding a great deal of cash if he sees few undervalued opportunities. See his newly updated first quarter portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of Arnold Van Den Berg..
Van Den Berg’s team has also found that most of their large-cap, dividend-paying stocks have come close to the upper ends of their valuation. As die-hard value investors, they would sell stocks that become too expensive.
Rather, while many tout the record profits of corporations, they believe many smaller companies have only just begun to come off the bottom, are mid-cycle and will not reach another earnings peak for five or so years. They have been looking for companies with great balance sheets, not more than 26% debt to capital and with more cash than debt. Many of these stocks trade for near book value because they have not been making a lot of money.
Van Den Berg’s only two new stocks he bought for his portfolio are: Newmont Mining (NEM, Financial) and Tesco Plc ADR (TSCDY, Financial). His largest position increases were Vishay Precision (VPG, Financial) and Orion Marine Group (ORN, Financial).
Newmont Mining (NEM)
Van Den Berg bought 483,691 of Newmont Mining in the first quarter. Year to date, the stock price has declined almost 18% to $49.20, from a 52-week high of $72.42.
Newmont Mining Corp. is engaged in the production of gold, the exploration for gold and the acquisition and development of gold properties worldwide. Newmont Mining has a market cap of $23.4 billion and a P/E ratio of 10.9 and P/S ratio of 2.3. The dividend yield of Newmont Mining stocks is 2.9%. Newmont Mining had an annual average earnings growth of 12.7% over the past 10 years. GuruFocus rated Newmont Mining the business predictability rank of 2.5-star.
Newmont’s stock price became depressed in the fourth quarter on disappointing earnings results. Though the company had earned $2.3 billion in 2010 and $366 million in 2011, it lost $1 billion in the fourth quarter, declined from earnings of $812 million in the prior year quarter. Revenue had also been increasing annually since 2006, and was $2.8 billion in 2011, compared to $2.6 billion the prior year quarter.
Van Den Berg looks for stocks with strong free cash flow, which Newmont has had since 2009, along with $2.5 billion in cash and $7.8 billion in long-term liabilities and debt.
Tesco Plc ADR (TSCDY)
Van Den Berg bought 199,350 shares of Tesco Plc in the fourth quarter. He was able to purchase shares after the stock dropped almost 20% to a 52-week low in the first quarter primarily due to a profit warning.
Tesco Plc is the UK's largest retailer and one of the world's international retailers. Tesco has a market cap of $41.72 billion; its shares were traded at around $15.16 with and P/S ratio of 0.4. The dividend yield of Tesco Plc stocks is 4.3%. Tesco had an annual average earnings growth of 4% over the past five years.
Tesco issued a profit warning in January that said a challenging consumer environment in the UK and early signs of more cautious behavior internationally had placed a strain on its profitability during the holiday period. It told investors to expect Group trading profit growth to be near the low end of the current market consensus forecast range. The company’s results were particularly affected by its significant price cuts during the holiday period, which were not offset by increased volume sales.
Vishay Precision (VPG)
The largest increase Van Den Berg made to a holding was Vishay Precision. He added 625,605 shares in the first quarter to the 37,000 shares he bought in the third quarter of 2011 at approximately $15 per share. At quarter end he had a total of 662,605 shares, or 5.38% of the company. Vishay dropped approximately 12.5% in the first quarter.
Vishay Precision Group Inc. is a designer, manufacturer and marketer of resistive foil technology products such as resistive sensors, weighing modules and control systems for a wide variety of applications. Vishay Precision has a market cap of $178.9 million; its shares were traded at around $13.98 with a P/E ratio of 18.4 and P/S ratio of 0.8.
Having joined the NYSE in June 2010, Vishay has only two years of public earnings records (previously, it was part of Vishay Intertechnology Inc. (VSH, Financial). They show that revenue increased from $208 million in 2010 to $238 million in 2011, while earnings declined from $11.7 million to $10.8 million in 2011. The company has $115 million in cash and $34.9 million in long-term liabilities and debt.
Van Den Berg got the stock for approximately $15, near its 2011 book value of $15.01. It is currently trading at $13.98 per share, a discount to book value.
Orion Marine Group Inc. (ORN)
Van Den Berg had been buying shares of Orion Marine Group in the second and third quarters of 2011, then bought 624,715 shares in the first quarter of 2012. At quarter end he owned a total of 988,665 shares, or 3.65% of the company.
Though the stock price declined almost 33% over the last year, it increased almost 7% year to date. Currently it is trading around $7.1 per share, a discount to book value of $8.61.
Orion Marine Group Inc. provides a broad range of marine construction and specialty services on, over and under the water along the Gulf Coast, the Atlantic Seaboard and the Caribbean Basin and acts as a single-source turnkey solution for its customers' marine contracting needs. Orion Marine Group has a market cap of $196.9 million with and P/S ratio of 0.8.
After four years of annual revenue increases, Onion Marine’s revenue dipped from $353 million in 2010 to $260 million in 2011. Net income of $21.88 million swung to a loss of $13.11. The company has generated free cash flow in four of the last five years, which reached $18.6 million in 2011. The company has $80.1 million in cash on its balance sheet and $22.1 million in long-term liabilities.
On March 23, Orion said it expects its margins to be under pressure due to weak economic growth and delays in federal spending in the first half of 2012. It also expects first quarter bottom line results to be significantly less than in the fourth quarter of 2011. "The company does not expect the start of recently awarded projects to materially begin until the third and fourth quarter of 2012," Orion Marine said in a statement.
Van Den Berg is clearly looking for smaller-cap companies trading near book value and does not mind holding a great deal of cash if he sees few undervalued opportunities. See his newly updated first quarter portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of Arnold Van Den Berg..
