Ken Fisher’s Top Mega-Cap New Purchases in Q3
Fisher also frequently deciphers the market in his Forbes column. On Sept. 5, he wrote that it was currently in the latter half of a bull run, with more ahead. Hence, he advised investors to buy “the biggest of the big,” as companies with $78 billion market capitalization or higher have traditionally performed best in similar scenarios. “And if I’m wrong and a bear lurks soon, mega-cap stocks will drop far less than more speculative smaller stocks,” he said.
In his updated portfolio, Fisher reveals these were his biggest purchases of the third quarter: Comcast Corp. (CMCSA), Petroleo Brasileiro SA (PBR), Toyota Motor Corp. (TM) and Royal Bank of Canada (RY).
Comcast Corp. (CMCSA)
Fisher purchased 11,737,561 million shares of Comcast for an average of $33.50 per share. The stock has increased 57 percent year to date. It has a market cap of $99.8 billion.
Comcast is a media, entertainment and communications company and majority of NBCUniversal. Its business ranges from high-speed Internet and cable television networks, to film and theme parks.
Comcast’s five-year annual revenue growth rate is 17.4 percent, EBITDA rate is 15.2 percent and free cash flow rate is 32.1 percent. It also has a P/E ratio of 20.5, P/B ratio of 2 and P/S ratio of 1.7.
In 2011, Comcast’s revenue increased 47 percent to $55.8 billion from $37.9 billion in 2010, due to the Jan. 28, 2011, acquisition of a 51 percent controlling interest in NBCUniversal, a media and entertainment company. It contributed 34 percent of its consolidated revenue and 19 percent of Comcast’s operating income before depreciation and amortization in 2011.
In its results for its second quarter ended June 30, 2012, NBC reported 6.1 percent year-over-year revenue growth, 35.1 percent earnings per share growth, and 2.2 percent free cash flow growth.
It also paid $438 million in dividends and spent $750 million repurchasing 25.8 million of its shares. It repurchased a total of 51.7 million common shares for $1.5 billion year to date and has $5 billion remaining under its share repurchase authorization.
Petroleo Brasileiro SA (PBR)
Fisher purchased 17,914,836 shares of Petroleo Brasileiro at an average price of $21 in the third quarter. The stock has declined 7 percent year to date. The company has a $150 billion market cap.
Petroleo Brasileiros, or Petrobras, is the Southern Hemisphere’s largest company by market cap and Latin America’s largest by revenue. It is a multinational energy corporation headquartered in Rio de Janeiro, Brazil, and majority owned by the Brazilian government.
Petrobras has a P/E ratio of 13, P/B ratio of 0.5 and P/S ratio of 0.6.
Petrobras’ revenue increased annually for the past three years, from $91.2 billion in 2009 to $145.9 billion in 2011, after a slight drop in 2009. Its net income increased from $14.7 billion to $19.3 billion. Free cash flow has been negative for the past four years.
In the first half of 2012, Petrobras’ revenues increased 2 percent compared to the same period last year, on higher export prices, domestic oil products indexed to international prices, and exchange variation effects; an 8 percent increase in domestic demand, mainly for gasoline; and increases in domestic gasoline and diesel prices.
Net income fell by 37 percent due to depreciation of the Real against the U.S. dollar, high expenses from dry wells and decreased oil exported due to reduced output after it stopped wells to improve operational efficiency and safety, and a difference in domestic and international oil prices.
Operating expenses were higher due to higher personnel expenses from a Collective Bargaining Agreement by 2011 and increased workforce and third-party technical services and higher exploration costs. They were partially offset by lower selling expenses.
In June, Brazil raised the price of diesel almost 4 percent and gasoline almost 8 percent, followed by another 6 percent increase in diesel in July, to enable the company to return to profitability.
Toyota Motor Corp. (TM)
Fisher purchased 4,740,858 shares of Toyota Motor Corp. at an average price of $79. The stock is up 19 percent year to date, while the auto and truck manufacturers segment is down almost 5 percent. TM has a market cap of $124.3 billion.
Japan-based TM is an auto company operating in three segments: automobile, finance and other (which is involved in housing and communications). At the end of the first quarter, it had 507 subsidiaries and 2012 associated companies.
TM has a P/E ratio of 16.1, P/B ratio of 0.9 and P/S ratio of 0.5.
In TM’s first fiscal quarter ended June 30, 2012, its net revenues increased 59.9 percent from the same period the previous year, and net income increased from 1.1 billion yen to 290.3 billion yen. The company reported significantly increased vehicle sales on recovered demand from the previous year, in which supply was hampered by the Great East Japan Earthquake. Vehicle sales increased in all regions, including Japan, North America, Europe, Asia and Central and South America, Oceania and Africa.
The company maintained its operating income forecast of 1 trillion yen, as it expects negative FOREX impact due to a weak euro and market deterioration risk.
Royal Bank of Canada (RY)
Fisher purchased 6,074,439 shares of Royal Bank of Canada for an average of $54 per share. The stock has gained 13 percent year to date. RY has a market cap of $84.9 billion.
Royal Bank of Canada is one of the largest banks in Canada by assets and market cap, and one of the largest in the world by market cap. It has more than 15 million clients in personal business, public sector and institutional, and has offices in Canada, the U.S. and 51 other companies.
It has a P/E ratio of 12.2, P/B ratio of 2.1 and P/S ratio of 2.4.
RY has a five-year annual growth decline of 1.8 percent, EBITDA growth rate of 2.8 and book value growth rate of 15.3. Its revenue has been increasing annually for the past three years, from $34.7 billion in 2009 to $36.3 billion in 2011. Net income has increased for the past four years, from $3.7 billion in 2009 to $6.5 billion in 2011. In 2011, it reported negative $3.3 billion in free cash flow, a decline from $9.9 billion the previous year.
The bank announced on Oct. 12, 2012, that it would repurchase up to 30 million of its common shares, representing about 2.1 percent of total shares outstanding. RY has a Tier I capital ratio of 13 percent and Total capital ratio of 15 percent.
Ken Fisher bought 61 other new stocks, the next largest of which are Novartis (NVS), Vodafone Group (VOD) and China Mobile (CHL). See all of them in his portfolio. Also check out the undervalued stocks, top growth companies and high yield stocks of Ken Fisher.