Andreas Halvorsen's Largest Second-Quarter Buys
Halvorsen said in his first-quarter letter that he possibly had been too cautious during the quarter, according to Reuters. In the second quarter, he bought 21 new stocks, the largest of which are: State Street Corporation (STT), Eastman Chemical Company (EMN), Pfizer Inc. (PFE), Eli Lilly (LLY) and W.R. Grace & Co. (GRA).
State Street Corporation (STT)
Viking invested 2.7% of their portfolio, or 7,519,669 shares, into largest new holding State Street Corporation. The share price was approximately $43.50. State Street’s stock collapsed in 2008, but has recovered 31% over the last year.
State Street is the world’s top financial services provider to institutional investors with $22.4 trillion in assets under custody and administration and $1.0 trillion in assets under management as of June 30, 2012.
State Street’s revenue and free cash flow has been increasing for the past three years. In the second quarter of 2012, the company’s earnings per share were $0.98, down 2% from $1.00 in the second quarter of 2011 and up 15% from $0.85 in the second quarter of 2011, while net income increased for the third straight quarter. The company said it has been experiencing a difficult economic environment, particularly internationally.
The company also announced that it would acquire Goldman Sachs’ hedge-fund administration business in a deal it expects to close in the fourth quarter of 2012.
State Street Corporation has a market cap of $20.48 billion; its shares were traded at around $41.9 with a P/E ratio of 11.2 and P/S ratio of 2.1. The dividend yield of State Street Corporation stocks is 2.3%. State Street Corporation had an annual average earnings growth of 1% over the past 10 years.
Eastman Chemical Company (EMN)
Viking acquired 4,763,400 shares of Eastman Chemical Company at an average price of $49 in the second quarter. Since then, the stock has advanced 13% to new 52-week highs.
Eastman Chemical Company is a global chemical company with a broad portfolio of chemical, plastic and fiber products. In the second quarter, Eastman Chemical saw slight revenue declines across all of its segments. It also completed the purchase of Solutia, a company that produced $520 million in revenue I the second quarter, which should meaningfully add to future growth and cash flow.
Eastman Chemical Company has a market cap of $7.68 billion; its shares were traded at around $55.48 with a P/E ratio of 12.3 and P/S ratio of 1.1. The dividend yield of Eastman Chemical Company stocks is 1.9%. Eastman Chemical Company had an annual average earnings growth of 6.1% over the past 10 years. GuruFocus rated Eastman Chemical Company the business predictability rank of 2-star.
Pfizer Inc. (PFE)
Halvorsen bought 6,809,900 shares of Pfizer Inc. at an average price of $22. Since then, the stock has advanced 9%. Pfizer Inc is a research-based, global pharmaceutical company that discovers and develops innovative, value-added products.
Pfizer’s second-quarter revenues decreased 15% in the U.S. due to the loss of exclusivity for its top-selling drug, Lipitor. Emerging markets was one of its fastest-growing units, with revenues up 14% from second-quarter 2011, mainly due to higher sales in China and Russia after launching more targeted promotional efforts. The biggest changes happening at the company are a pending sale of its nutrition business and a possible spin-off of its animal health business, which could IPO in August.
Pfizer Inc. has a market cap of $178.14 billion; its shares were traded at around $23.93 with a P/E ratio of 10.3 and P/S ratio of 2.6. The dividend yield of Pfizer Inc. stocks is 3.7%. Pfizer Inc. had an annual average earnings growth of 0.5% over the past 10 years.
Eli Lilly (LLY)
Halvorsen purchased 3,492,300 shares of Eli Lilly at an average price of $41. The stock has since gained 3%.
Eli Lilly and Company discovers, develops, manufactures and sells pharmaceutical products. The company’s revenue has grown every year for the last decade, and its last two-years of earnings were its highest in the same period.
Similar to Pfizer, Lilly lost revenue in the second quarter due to patent expirations of some of its drugs. Global revenue declined 10% to $5.6 billion, driven by the expiration of its patent on Zyprexa, its highest-selling drug, sales of which dropped 73%. Other areas were strong. Growth in China and Japan was 28% and 15%. Its Elanco Animal Health segment’s revenue grew 32%.
Lilly raised its 2012 earnings per share guidance to a range of $3.29 to $3.39 on a reported basis, from the previously expected $3.14 to $3.29.
Eli Lilly & Co. has a market cap of $49.23 billion; its shares were traded at around $42.301 with a P/E ratio of 11.3 and P/S ratio of 2. The dividend yield of Eli Lilly & Co. stocks is 4.6%. Eli Lilly & Co. had an annual average earnings growth of 5.3% over the past 10 years. GuruFocus rated Eli Lilly & Co. the business predictability rank of 2.5-star.
W.R. Grace & Co. (GRA)
Halvorsen purchased 2,717,594 shares of W.R. Grace & Co. at an average price of $54, which equates to 3.45% of shares outstanding. Since then, the stock has gained 9%.
W.R. Grace & Co. produces specialty chemicals. They primarily operate through the following two business segments: Davison Chemicals and Performance Chemicals. In the second quarter, the company’s net income declined to $69.3 million from $74.8 million the prior year. The company’s greatest area of growth were Asia Pacific, which increased 11.2%, and Latin America, which rose 12.9%. North America and Europe, Middle East and Africa sales declined 4% and 4.8%, respectively. Sales to emerging markets grew 13.3%, representing 36.3% of sales.
W.R. Grace & Co. has a market cap of $4.46 billion; its shares were traded at around $58.97 with a P/E ratio of 14.7 and P/S ratio of 1.4. W.R. Grace & Co. had an annual average earnings growth of 6.7% over the past 10 years.
Andreas Halvorsen’s largest holdings are Priceline.com (PCLN), MasterCard (MA) and Visa (V). See his portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of Andreas Halvorsen.