In the first quarter of this year, Black’s portfolio was valued at $779 million, with 12% quarter-over-quarter turnover and 13 new stocks added, for a total of 132 holdings. But he put the most amount of money to work in the following companies: WPP PLC (NASDAQ:WPPGY), Publicis Groupe SA (PUBGY), Toronto-Dominion Bank (NYSE:TD), and Warren Buffett pick Chicago Bridge & Iron Company (NYSE:CBI).
The New Buys Overview
WPP PLC (NASDAQ:WPPGY)
Black’s largest purchase of the quarter, he purchased 260,306 shares at $79 on average, for a 2.7% situating in his portfolio. The price since increased 11% from his average price to $87.53 on Wednesday.
WPP is a London-based multinational advertising and public relations company with operations in 110 countries. The company’s revenue and net income has been on a steadily increasing trajectory for most of the past decade, as demonstrated in the chart below:
In the first quarter of 2013, WPP saw revenue growth of 5.9% year over year in sterling to 2.53 billion pounds. The company is using its strong free cash flow on capital expenditures, acquisitions, share repurchases and dividend increases calibrated to enhance shareholder value. It generated 1.4 billion in free cash flow in the 12 months ended March 31, 2013, and spent almost 1.4 billion on capital expenditures, acquisitions, share repurchases and dividends in the same period. The board is considering increasing its pay-out target ratio from 40% to 45% or 50%.
The company is focused on expanding through new acquisitions, and closed 13 transactions in the first quarter in a number of countries.
WPP’s P/E of 18.42 is close to a two-year high, P/B is 2.2 and P/S of 1.51 is close to a 10-year high. The share price of $11.57 is almost near its 10-year high.
Publicis Groupe SA (PUBGY)
Black purchased 669,328 shares of Publicis Groupe for $17 per share on average, giving the company a 1.4% portfolio weighting. It has gained 10% from the average price since. Tuesday its price is $18.15.
France-based Publicis Group is a communications group specializing in marketing, publicity and media purchasing.
The company also has a primarily increasing earnings and revenue history for 10 years, and particularly for the past several years:
Publicis has a P/E ratio of 16.9, P/B ratio of 5.8 and P/S ratio of 3.99 which is approaching a 10-year high of 4.
Toronto-Dominion Bank (NYSE:TD)
Black bought 118,126 shares of Toronto-Dominion Bank for $83 per share, a 1.3% portfolio weighting. In the meantime the stock has declined 2.3% from the average price.
Toronto-Dominion Bank, collectively with its subsidiaries called TD Bank Group, offers Canadian personal and commercial banking. The company’s revenue and earnings history has unfolded as follows over 10 years:
In the first quarter of 2013, net income rose 9% year over year to $1.92 and EPS rose 8% to $2 per share. The dividend also increased 5% to $0.04 per share.
The bank’s P/E ratio of 11.74 is close to a three-year low, and P/B of 1.61 is close to a one-year low. It has a P/S of 3.3.
Chicago Bridge & Iron Company (NYSE:CBI)
Black spent $53 per share on average for 83,190 shares of Chicago Bridge & Iron in the first quarter. It is 66% of his portfolio and shares have gained 19% from his average purchase price. Warren Buffett of Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B) also purchased shares of the company in the first quarter, sending its stock price up sharply:
CB&I is a major energy infrastructure and government services company. Its revenue has spent the last several years recovering from a two-year decline:
Earnings have also strengthened in the last several years:
In the first quarter, CB&I reported $33.6 million in net income, including acquisition-related costs of $51.2 million after tax, an 87% year-over-year increase. Net income likewise increased 72% to $147.8 million. Accretion from the acquisition of Shaw Group in February contributed to the robust growth. Management said it saw the acquisition as making CB&I “the most complete energy infrastructure-focused company in the world.”
Buffett, or one of his managers, also liked the company enough to amass 6.15% of its outstanding shares, equal to 6,508,600, in the first quarter. It was his company’s only new buy of the quarter.
Investing Guru John Keeley commented on developments affecting his holding of the company in his Keeley Funds fourth quarter 2012 letter:
“Although ADT was the top contributor from the industrial sector during the quarter, Chicago Bridge and Iron (CBI) was another strong performer in the sector. The global engineering and construction firm rose sharply in December after shareholders of Shaw Group approved Chicago Bridge and Iron's $3 billion acquisition which was proposed in July. The combined entities will become one of the largest energy construction and engineering contracting firms in the world.”
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