Jeff Auxier (Trades, Portfolio) of Auxier Asset Management picked up eight new holdings during the fourth quarter, including Fastenal (FAST, Financial), an industrial stock Auxier believed to be too richly valued this past August.
In a GuruFocus interview, Auxier said Fastenal was on the fund’s watchlist since it was trading at an expensive 25x earnings, also citing a bubble environment due to the Chinese credit boom, which fueled a run-up in commodities. Fastenal continues to trade at a high valuation, however, at 24x earnings. With a relatively small purchase of 5,100 shares, Auxier may be waiting for a better time to buy in.
For the fourth quarter, the Auxier Focus Fund saw its stocks gain 6.83%, slightly trailing the Standard & Poor's 500’s return of 7.04%.
Auxier’s largest purchase was 7,195 shares of five-star business predictability rated Biogen, at an average cost of $287.65 per share. The pharmaceutical company develops therapies for autoimmune disorders, neurodegenerative diseases and hemophilia.
Biogen’s stock has declined 37% over the past year and currently trades at 16.4x earnings. Its preliminary EPS for FY 2015 is $15.34, up from $12.37 the year before. Biogen has seen its earnings rise steadily over the years.
The company’s sales of Tecfidera increased 8.2% year over year to record $3.6 billion in sales. Tecfidera is an oral multiple sclerosis treatment that was approved by the FDA in 2013.
During 2015, Biogen repurchased 16.8 million shares, completing its $5 billion share repurchase program.
St. Jude Medical Inc. (STJ, Financial)
Auxier purchased 22,019 shares of St. Jude Medical, which traded at an average price of $63.04 during the quarter. St. Jude develops cardiovascular medical devices such as pacemakers, defibrillator systems and structural heart products.
The stock has declined 24% in the past year; it currently trades at 14.23x earnings. In the third quarter, St. Jude reported EPS of 75 cents, down from 82 cents in the year-ago quarter.
The company’s operating margin, however, has slipped to about 18% in preliminary results for FY 2015, after posting levels over 20% prior to 2007. The dividend yield of 2.31% is close to the three-year high, with a 32% payout ratio.
Michael Kors Holdings (KORS, Financial)
Auxier also bought 10,100 shares in Michael Kors for an average of $41.22 per share. The apparel and accessories brand has seen its stock drop 30% over the past year and may now be undervalued according to the Peter Lynch earnings line.
In FY 2015 ended March, Michael Kors Holdings earned $4.28 per share, up from $3.22 last year. In addition, the company has been increasing its operating margin to above 25% since 2014.
In the third quarter of 2016, Michael Kors reported net income of $1.59 per diluted share, up from $1.48 per share in the year-ago quarter.
Fastenal
Fastenal’s business predictability is rated 4.5 out of 5 stars from GuruFocus and currently trades at 24x earnings after holding steady through the past year. It may be due to Fastenal’s solid price that Auxier bit the bullet and purchased 5,100 shares at an average of $39.43 per share.
The company sells industrial and construction supplies such as screws, bolts, nuts and washers.
“Fastenal’s business is great. They make nuts and bolts, and the business is boring. Their returns are really exceptional,” Auxier said of the company in a GuruFocus interview.
In the third quarter of 2015, Fastenal earned 47 cents per share, about the same as the 45 cents per share earned in the year-ago quarter. Annual EPS has risen each year since 2010.
Gilead Sciences (GILD, Financial)
His fifth-largest new investment was 2,282 shares of Gilead for an average of $104.10 per share. The biopharmaceutical company primarily focuses on HIV and AIDS, liver diseases such as hepatitis and cardiovascular and respiratory conditions.
The stock is down 9% over the past year and currently trades at 8x earnings. The Peter Lynch earnings line indicates Gilead may be undervalued.
Gilead released its fourth quarter results last week with net income of $3.18 per share, up from $2.18 in the prior year quarter. For the full year, the company reported a $7.7 billion increase in sales from 2014 due to sales of Harvoni, a hepatitis drug released in October 2014.
The trailing dividend yield is 1.47% with an 8% payout ratio.
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