Managers at Dodge & Cox, a highly regarded investment firm, typically buy stocks whose long-term earnings and cash flow prospects exceed their current valuations. Their top holdings are: Hewlett Packard (HPQ), Wells Fargo (WFC), Capital One Financial (COF), Comcast Corp. (CMCSA) and GlaxoSmithKline (GSK).
Regarding their outlook for the first quarter, Dodge & Cox Chairman and President Kenneth Olivier said in his year-end letter, “term returns, and as significant pessimism about the future has driven down equity prices, we have been finding attractive opportunities around the world. Today, global equity markets are trading at 10 to 12 times forward estimated earnings, and many companies have strong balance sheets and opportunities for long-term global growth. Corporate bonds are also very attractive in this environment. Their yield premiums are at high levels now, and we’re seeing interesting opportunities in companies across a range of industries.”
Dodge & Cox bought 5,303 shares of Agilent Tech (A) at an average price of $43 in the first quarter of 2012.
Agilent Technologies is the world's premier measurement company and a technology leader in communications, electronics, life sciences and chemical analysis. Agilent Tech has a market cap of $14.6 billion; its shares were traded at around $39.81 with a P/E ratio of 13.8 and P/S ratio of 2.2. The dividend yield of Agilent Tech stocks is 1%. Agilent Tech had an annual average earnings growth of 13.2% over the past five years.
On March 9, Agilent reported operating results for the quarter ended Jan. 31, 2011. It had net income of $193 million, compared to $79 million the previous year, and generated $120 million of cash from operations, compared to $30 million the previous year. Net revenue also increased 25% to $1.5 billion over the previous year.
Revenue improvement was driven by strong growth in academic and government markets and increased demand in pharmaceutical markets. The company also acquired Varian, and divested two businesses, which resulted in an overall 6 percent increase in revenue.
In January, the company initiated a quarterly cash dividend of 10 cents.
Dodge & Cox bought 5,500 shares of Moody’s Corp. (MCO) at an average price of $39.
Moody's Corporation is the parent company of Moody's Investors Service, a provider of credit ratings, research and analysis covering debt instruments and securities in the global capital markets, Moody's KMV, a provider of credit risk processing and credit risk management products for banks and investors in credit-sensitive assets serving the world's largest financial institutions.
Moody’s Corp. has a market cap of $9.29 billion; its shares were traded at around $38.57 with a P/E ratio of 16.5 and P/S ratio of 4.1. The dividend yield of Moody’s Corp. stocks is 1.5%. Moody’s Corp. had an annual average earnings growth of 9.8% over the past 10 years.
In the first quarter, Moody’s revenue jumped to $646.8 million from $577.1 million the previous year. Net income edged up to $175.5 million from $157.1 million the previous year. The increases primarily reflected growth in corporate and public, project and infrastructure debt issuance as well as continued solid performance from Moody's Analytics. Market conditions have made the company cautious about their expectations for the remainder of the year.
Dodge & Cox’s final purchase was the S&P 500 ETF (SPY). It acquired 1,505 shares at an average price of $135 per share. In the last year, the S&P has returned 0.04% and 11.9% year to date. Last year, the Dodge & Cox Fund returned negative 4.08%, and the S&P returned 2.12%.
See Dodge & Cox’s other first quarter adds, sales and reductions in their newly updated first quarter portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of Dodge & Cox.