Bill Nygren Returns 34%, Thinks These 3 Stocks Are Undervalued
“Where you see risk, whether that’s cyclic risks or technical obsolescence risk, or just the risk that there isn’t a dividend and you’re getting your return through share repurchase instead, we find investors have left those stocks somewhat behind, and that’s where the better values are.”
Within the technology space, he specifically likes: Intel (INTC), Texas Instruments (TXN) and Oracle (ORCL).
“In the technology space we own a lot of the big companies that are buying back stock and that are paying out reasonable dividends,” he said of the stocks.
Nygren has a position of 8.8 million Intel Corp. shares as of the first quarter’s end, though he has had an stake in the company since before 2009. His sixth-largest holding, it has a 2.4% portfolio weight. The price has also gained 17% from his average purchase price, to trade for $24.99 Friday.
Intel builds technologies used in computing devices. Its stock has increased 17% over the last 10 years.
Intel’s 10-year price, revenue and earnings history:
The Peter Lynch chart indicates that it has been undervalued for several years:
Nygren mentioned that these stocks have a solid dividend and share buyback practices. Oracle has a dividend yield of 3.6%, which is higher than 91% of the companies in the global semiconductors industry. Its share buyback rate is 2.2, higher than 98% of the companies in the semiconductors industry.
Texas Instruments (TXN)
Nygren owns 5.465 million shares of Texas Instruments, a 2.4% weighting in his portfolio. This is another long-term holding that he has a 24% average gain on.
Texas Instruments is a semiconductor company with a $39.35 billion market cap. Its stock has increased 97% over the past 10 years.
TXN’s 10-year price, revenue and earnings history:
The Peter Lynch Chart implies overvaluation:
Intel has a dividend yield of 2.4%, higher than 79% of the stocks in the global semiconductors industry. Its share buyback rate amounts to 2.5%, higher than 98% of the stocks in the global semiconductor industry.
Nygren’s eighth largest holding, he owns 5.98 million shares, amounting to 2.4% of his portfolio. He has an average gain of 30% on his average purchase price on this stock he has held since the second quarter of 2009.
Oracle is the an enterprise software and computer hardware products and services company with a $155.69 billion market cap. Its stock has increased 150.5% over the past 10 years.
Oracle’s 10-year price, revenue and earnings history:
The Peter Lynch chart suggests that Oracle is about fairly valued:
The dividend yield of Oracle is current 0.4%, higher than 63% of the companies in the global software infrastructure industry. Its share buyback rate is 0.2%, higher than 91% of the companies in the global software infrastructure industry.
To see more of Bill Nygren’s stocks, see his portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of Bill Nygren.
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