Legendary Julian Robertson Buys HCA Holdings, Starbucks, Sherwin Williams in Q1
Julian Robertson began hedge funding in 1980 and is considered the founder of the long-short strategy, at which he was eminently successful, turning his initial $8 million into over $22 billion by the late ‘90s. He closed his fund, Tiger Management, to outside investment after several down years but still manages internal investment, primarily his own money.
He is famously quoted as saying, "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."
Robertson bought 506,600 shares of HCA Holdings (HCA) in the first quarter at an average price of $25. HCA Holdings owns, manages or operates hospitals, freestanding surgery centers, diagnostic and imaging centers, radiation and diagnostic and imaging centers, radiation and oncology therapy centers, rehabilitation and physical therapy centers and various other facilities.
HCA’s stock price fell almost in half from July to August 2011 as it announced lower than anticipated second-quarter revenue growth, an earnings decline, and surgical admissions decline of 1.6 percent on a same facility basis (excluding international facilities). Net income totaled $229 million, down from $293 million in the prior-year period. Revenue increased 4 percent to $8.1 billion from $7.8 billion.
Revenue for the first quarter of 2012 had a 13.5% increase in revenue to $8.4 billion, and net income increased to $540 million from $240 million in the prior-year period. Positive first-quarter results were driven by strong increases in patient volumes, effective cost management and continued focus on quality and patient service agendas.
Robertson bought 218,500 shares of Starbucks (SBUX) at an average price of $50. In the last year the stock has increased almost 52%.
In the last ten years, Starbucks has had annual growth rates of revenue 16.9%, EBITDA 16.3% 16.3% and free cash flow 28.5%. The company began paying a dividend of $0.32 in 2010 and raised it to $0.52 in 2011.
The company is making many big changes. At its March 21 investor conference, it announced it would expand into the $8 billion premium single-serve coffee market by partnering with Green Mountain Coffee Roasters (GMCR) to co-produce k-cups for the Keurig coffee machine. It is also getting into the premium juice market after acquiring Evolution Fresh stores in November 2011 for $30 million in cash.
The company is focusing on China for store growth and plans to triple its footprint in the country to 1500 stores by 2015. On May 2, the company announced that it named Former Defense Secretary Robert Gates to its board of directors to help it accelerate its global growth.
Robertson bought 102,800 shares of Sherwin-Williams (SHW), the company founded in 1866 that manufactures, distributes and sells coatings and related products, in the first quarter at an average price of $101. Year to date, Sherwin-Williams has increased 39 percent and 46% over the last year.
In the last ten years, Sherwin-Williams has had growth rates of 9.9 percent for revenue, 9 percent for EBITDA and 4.4 percent for free cash flow. The company has also increased its dividend for 34 consecutive years.
In May, the company introduced its groundbreaking Emerald and ColorCast Eco Toners, the highest performing, environmentally responsible paints and colorants in the industry. It will make Sherwin-Williams “the only company that can tint its full line of colors with zero VOC colorants,” the company said in a statement.
In the first quarter of 2011 the company had record net sales of $2.14, a 15.1% increase from the prior-year quarter. The increase was due mainly to higher paint sales volume and selling price increases, with increases seen across all operating segments. The company plans to open 60 to 65 new stores for the full year. It says its balance sheet is flexible and positioned to make future acquisitions and investments in the business.
Robertson bought 279,000 shares of Verisign Inc. (VRSN) at an average price of $37. The stock increased only slightly in 2011 and gained almost 12 percent year to date. Verisign was also one of the top stocks purchased by hedge funds in 2011.
Verisign is a provider of Internet infrastructure services and manages .com and .net domain names. In the last 10 years, revenue has grown at a rate of 0.5%, EBITDA at 9.5%, and free cash flow has remained positive. In the first quarter of 2012 it reported a 13 percent year-over-year growth in revenue to $206 million, and net income of $68 million, compared to $41 million in the prior-year period. The quarter marked another record for new domain registrations, and it boosted its cash position by $40 million to $1.39 billion.
Verisign repurchased approximately 1.8 million shares in the quarter for a cost of $68 million and at quarter end still had $763 million available and authorized under its current share repurchase program.
See more of Julian Robertson’s buys and sells in his portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of Julian Robertson.