Billionaire Paul Tudor Jones Shakeups: Apple (AAPL), eBay (EBAY) And More
One of Tudor's biggest moves last quarter was a 4,000% increase in its Apple Inc. (NASDAQ: AAPL) shares owned, now making the stock its second largest holding and 6.5% of its portfolio. Apple continues to trade around 10 times earnings, which is below where other giant tech companies trade, such as IBM and Oracle. Compared to the broader tech industry, Apple only trades at a 4% premium to its peer group, but has historically traded at a 35% premium.
Apple Inc. is down over $250 from its 2012 peak, but its products have been gaining strength. Apple holds top positions in both the mobile hardware (iPhone) and mobile operating system (iOS) markets, with around 38% of the market share for each, and could be worth taking a look at for investors looking for a mega-cap value play.
Other new positions by Tudor includes Lowe's Companies, Inc. (NYSE: LOW) and Walgreen Company (NYSE: WAG), now making up the 8th and 15th positions in Tudor's portfolio, respectively. Lowe's is addressing the Internet craze by making a shift toward e-commerce and generating an online presence. This includes the acquisition of ATG Stores, which is one of the leading online retailers of home improvement. The retailer's other initiative includes its "My Lowes" online tool for helping customers better manage their homes and remodeling projects (see if it's finally time to buy home improvement retailers). Lowe's also trades below major peer The Home Depot on a price to sales basis, with Lowe's trading at 0.98 times sales and The Home Depot at 1.53.
Walgreen, another of Tudor's new additions, managed to finally renew its contract with Express Scripts toward the end of 2012 after a span of several months where Express Script customers could not use Walgreen due to a previously failed agreement renewal. Amidst this issue, Walgreen has been active on the acquisition side, acquiring a 45% stake in Alliance Boots GmbH for $6.7 billion. Walgreen expects the Alliance Boots partnership to be accretive to its adjusted EPS by $0.18 to $0.22 in 2013.
Walgreen also has an impressive cash position, ending last quarter with nearly $1.8 billion in cash, up 67% year over year. The company also declared a 22% hike in its regular quarterly dividend last quarter, which is well in line with its long-term dividend payout ratio of 30-35%. This recent hike also reflects an annualized growth rate of 20.5% over the last ten years for its dividend payment (see why Walgreen could go up 200%). Its 2.3% dividend yield should also provide support for investors as the pharma company looks to recover from the Express Scripts mishap.
Other notable additions to Tudor's portfolio includes CA, Inc. (NASDAQ: CA) and eBay Inc(NASDAQ: EBAY). CA became Tudor's 18th largest holding and eBay its 23rd. CA is an independent enterprise information technology (IT) management solutions company that is increasing its cloud exposure. IDC has even declared CA as the market leader in cloud systems management. CA is also adopting an acquisition strategy to further break into cloud computing; this includes recent acquisition of Arcot Systems Inc.
eBay is one of the largest online retailers in the world, and one that has been seeing an impressive turnaround in its marketplace (auction) segment (check out eBay's SOTP valuation). As well, eBay's payments segment is showing growth, including its recent agreement with Discover.
Both the marketplace and payments segments have grown sequentially in each of the last eight quarters. The other big initiative for eBay is its push to mobile, which includes mobile apps and its acquisition of RedLaser, a bar-code scanning app for the iPhone. ABI Research believes that the mobile commerce market doubled in 2011 and expects the segment to grow to over 24% of total e-commerce sales by 2017, and I believe that eBay will be at the forefront of this market with both its mobile-focused auction marketplace and PayPal.
Don't be fooled
Billionaire Paul Tudor Jones has the tech giant, Apple Inc., as its top tech pick, where the company may well be undervalued. As well, Tudor has made a number of new additions to its portfolio, from pharma companies to home improvement retailers, both (Walgreen and Lowe's) should be solid bets for the future. Tudor also likes eBay, which I like given its PayPal segment. Finally, Tudor's lesser known pick includes CA, which is a play on a rebounding tech-budget for businesses and should perform nicely as cloud computing gains strength.