To Richard Aster, there is no difference between growth and value. He manages both Meridian Growth Fund and Value Fund, and outperforms the market over long term with both of them.
Richard Aster seeks out-of-favor companies that have defensible positions in their industries, strong or improving balance sheets, reasonable valuations and good prospects for earnings growth believing that over the long term this strategy will continue to outperform. These are some of his outlook, commentaries and stock ideas.
Outlook
The economy grew at a respectable 2.5% rate during the fourth quarter of 2006. The unemployment rate now stands at a low 4.5%, job growth is solid and wages are rising at a 4.0% annual-rate. This healthy labor market supports continued gains in consumer spending. Nonresidential construction is growing while expansion in the manufacturing sector is moderating and the auto and housing sectors struggle. There has not been a significant change in interest rates or the rate of inflation during the quarter. Our economic outlook is for continued modest growth, stable interest rates and inflation in the range of 2% to 3%. Corporate profits, we believe, will rise in the mid single-digit range this year. The major economic risks are further deterioration in the mortgage market and disruptions in energy supplies.
On Carnival Corporation (CCL, Financial)
Carnival Corporation, a current holding, is the worlds largest cruise company with cruise packages ranging from economy to premium price points and covering all important geographic destinations, The global cruise industry is forecast to continue its long-term growth rate of 9% given its increasing penetration into the vacation market, demographic trends and passenger satisfaction. Carnival has a strong balance sheet and is estimated to grow earnings at an annual rate of 14% during the next 5 years.We believe Carnival is well managed and attractively valued with a yield in the area of 3%, a price earnings ratio of 15 times earnings and selling at roughly 2 times book value.
On UCBH Holdings (UCBH, Financial)
UCBH Holdings, a current holding, is a commercial bank that provides services to the Chinese community in the U.S. and American companies doing business in China. The company has 40% share of this segment in the important Northern California region and strong positions in Los Angeles, Seattle, Boston and New York. UCBH will benefit from the growing Asian population in the U.S. and expanding trade between China and the U.S. The Asian population in the U.S. is expected to grow from 11 million in 2000 to 33 million by 2050. China is our largest trading partner and its importance will continue to grow. Recently, UCBH announced its intent to acquire privately-held Business Development Bank Ltd. in Shanghai, which should accelerate growth in the years ahead. This allows the bank to provide full services to U.S. customers and better serve small and medium-sized Chinese enterprises doing business in the U.S. The stock sells at a reasonable valuation given its track record, financial returns and long-term business outlook.
On Zebra Technologies (ZBRA, Financial)
Zebra Technologies, a current holding, is the leading producer of printers focused on the business supply chain and security markets. Regulatory changes in Europe in 2005 required the company to revamp much of its product line, an effort that took a greater than expected toll on Zebra’s research and development capabilities and resulted in a lack of new products worldwide. This hurt sales in this rapidly evolving industry and was exacerbated by tough conditions in the retail market. With the European transition complete, Zebra has since come out with an attractive new product line and new product sales have improved significantly. Revenue growth in the recently completed March quarter was up over 18% compared to the prior year. The company should benefit from growth in security and the emerging RFID market for the next several years. We believe earnings per share can grow from $1.56 in 2006 to around $2.50 over the next 3 to 5 years. Zebra has an excellent balance sheet with over $6 in cash per share and we believe it trades at a reasonable valuation given its growth prospects.
Read the complete shareholder letter: http://www.meridianfund.com/pdfs/Value0307.pdf
Richard Aster seeks out-of-favor companies that have defensible positions in their industries, strong or improving balance sheets, reasonable valuations and good prospects for earnings growth believing that over the long term this strategy will continue to outperform. These are some of his outlook, commentaries and stock ideas.
Outlook
The economy grew at a respectable 2.5% rate during the fourth quarter of 2006. The unemployment rate now stands at a low 4.5%, job growth is solid and wages are rising at a 4.0% annual-rate. This healthy labor market supports continued gains in consumer spending. Nonresidential construction is growing while expansion in the manufacturing sector is moderating and the auto and housing sectors struggle. There has not been a significant change in interest rates or the rate of inflation during the quarter. Our economic outlook is for continued modest growth, stable interest rates and inflation in the range of 2% to 3%. Corporate profits, we believe, will rise in the mid single-digit range this year. The major economic risks are further deterioration in the mortgage market and disruptions in energy supplies.
On Carnival Corporation (CCL, Financial)
Carnival Corporation, a current holding, is the worlds largest cruise company with cruise packages ranging from economy to premium price points and covering all important geographic destinations, The global cruise industry is forecast to continue its long-term growth rate of 9% given its increasing penetration into the vacation market, demographic trends and passenger satisfaction. Carnival has a strong balance sheet and is estimated to grow earnings at an annual rate of 14% during the next 5 years.We believe Carnival is well managed and attractively valued with a yield in the area of 3%, a price earnings ratio of 15 times earnings and selling at roughly 2 times book value.
On UCBH Holdings (UCBH, Financial)
UCBH Holdings, a current holding, is a commercial bank that provides services to the Chinese community in the U.S. and American companies doing business in China. The company has 40% share of this segment in the important Northern California region and strong positions in Los Angeles, Seattle, Boston and New York. UCBH will benefit from the growing Asian population in the U.S. and expanding trade between China and the U.S. The Asian population in the U.S. is expected to grow from 11 million in 2000 to 33 million by 2050. China is our largest trading partner and its importance will continue to grow. Recently, UCBH announced its intent to acquire privately-held Business Development Bank Ltd. in Shanghai, which should accelerate growth in the years ahead. This allows the bank to provide full services to U.S. customers and better serve small and medium-sized Chinese enterprises doing business in the U.S. The stock sells at a reasonable valuation given its track record, financial returns and long-term business outlook.
On Zebra Technologies (ZBRA, Financial)
Zebra Technologies, a current holding, is the leading producer of printers focused on the business supply chain and security markets. Regulatory changes in Europe in 2005 required the company to revamp much of its product line, an effort that took a greater than expected toll on Zebra’s research and development capabilities and resulted in a lack of new products worldwide. This hurt sales in this rapidly evolving industry and was exacerbated by tough conditions in the retail market. With the European transition complete, Zebra has since come out with an attractive new product line and new product sales have improved significantly. Revenue growth in the recently completed March quarter was up over 18% compared to the prior year. The company should benefit from growth in security and the emerging RFID market for the next several years. We believe earnings per share can grow from $1.56 in 2006 to around $2.50 over the next 3 to 5 years. Zebra has an excellent balance sheet with over $6 in cash per share and we believe it trades at a reasonable valuation given its growth prospects.
Read the complete shareholder letter: http://www.meridianfund.com/pdfs/Value0307.pdf
