Rogers, chairman of T. Rowe Price Group overseeing half a billion dollars and with the company 30 years, explained his second quarter economic outlook in his first quarter commentary:
“Considering the strong run in stocks during the past few months, we would not be surprised to see a short-term correction. That said, the positives outweigh the negatives in our view. The U.S. economy should continue to expand at a moderate pace with contained inflation, propelled by housing and growing strength in the labor market. The U.S. is in a good position relative to other developed markets. The industrials sector is performing better, and Congress and the Obama administration appear less contentious than at the end of last year. The Federal Reserve is likely to keep its stimulus programs in place a while longer. Eurozone risks remain, but they could decline in the months ahead. We rarely make dramatic changes to our investment strategies based on macroeconomic concerns. Rather, we prefer to focus on individual companies whose price/earnings multiples and dividend yields look attractive.”
Below is a brief overview of Rogers’ first quarter picks:
Rogers purchased 325,000 shares of new holding Apple at an average price of $466 in the first quarter, giving it a 0.57% weighting in his portfolio. After a more than three-year run, Apple’s stock has retreated almost 25% year to date, to trade for $400.35 per share on Wednesday.
The Apple addition comes about a year after Rogers quipped to Bloomberg, “I figure there has to be someone in the world that doesn’t hold Apple and it might as well be me.” He went on to say that while T. Rowe Price was a big investor in Apple, the value funds such as his did not as there was “a little bit of a disagreement between price and valuation,” so they “opted to invest in cheaper situations.”
Since the interview, however, Apple has become more attractive from a valuation standpoint. While its price dropped to its one-year low, its P/E ratio of 9.52 is close to a 10-year low, its P/B ratio of 3.34 is close to a five-year low, and P/S ratio of 2.41 is close to a five-year low.
In the quarter ended Dec. 29, 2012, Apple reported record revenue, increased to $54.5 billion from $46.3 billion in the year-ago period. Its net profit was also a record at $13.1 billion, or $13.81 per diluted share, compared to $13.1 billion, or $13.87 per diluted share, in the year-ago period.
Apple sold a record 47.8 million iPhones during the quarter, and a record 22.9 million iPads, while sales of Macs and iPods declined from the year-ago quarter. The company declared a cash dividend of $2.65 per share.
Apple’s Board of Directors has declared a cash dividend of $2.65 per share of the Company’s common stock.
After dispersing $10 billion of the $45 billion in cash it pledged to return to it shareholders, David Einhorn of hedge fund Greenlight Capital pressured the company to return even more and issue preferred stock. Though Einhorn eventually dropped a lawsuit against the company, Apple CEO Tim Cook called the suit “silly” at its annual shareholder meeting in March, but Silicon Valley’s Mercury News reports he added, “I don't think the issue of returning cash to shareholders is silly -- we're seriously considering it."
Western Union (NYSE:WU)
Rogers purchased 5.5 million shares of Western Union for $14 per share on average in the first quarter. It was the stock’s lowest average price since early 2009.
Western Union, a money-transfer provider for the underserved, saw its stock plunge almost 30% from Oct. 26, 2012, to Oct. 31, 2012. On Oct. 26, the company filed a document with the SEC announcing that in 2011 and 2012, it received investigation demands from state attorneys general into whether it took adequate steps to prevent consumer fraud from 2010 to 2011. The company also that day lowered its projected earnings estimates.
For 2012, its full-year revenue came in line with lowered estimates, at a 3% increase from 2011 to $5.7 billion. It also reported GAAP EPS of $1.69, compared to $1.84 in the prior year.
Western Union returned $772 million in the form of share repurchases and $254 million in the form of dividends in 2012. Its current dividend yield of 3% is close to a 10-year high.
Western Union has a P/E of 8.7, P/B of 9.1 and P/S of 1.6.
Joy Global (NYSE:JOY)
Rogers purchased 750,000 shares of Joy Global for $63 per share on average in the first quarter. The weighting of the new holding is 0.18% of his portfolio.
Joy Global Inc. was incorporated in Delaware. The company is a manufacturer and servicer of mining equipment for the extraction of coal and other minerals and ores. Joy Global Inc. has a market cap of $5.51 billion; its shares were traded at around $53.43 with a P/E ratio of 7.5 and P/S ratio of 1. The dividend yield of Joy Global Inc. stocks is 1.3%. Joy Global Inc. had an annual average earnings growth of 31% over the past 10 years. GuruFocus rated Joy Global Inc. the business predictability rank of 3.5-star.
Hospira Inc. (NYSE:HSP)
Rogers bought 1,168,700 shares of Hospira for $32 per share on average in the first quarter. The size equals a 0.15% of his portfolio.
Hospira Inc. was incorporated in Delaware on Sept. 16, 2003, as a wholly owned subsidiary of Abbott Laboratories. Hospira Inc. has a market cap of $5.13 billion; its shares were traded at around $31.29 with a P/E ratio of 115.3 and P/S ratio of 1.3.
To see more of Brian Rogers’ investing activity, see his portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of Brian Rogers.