In this article, I'd like to share with you some of Chris Shumway’s best holdings based on their earnings yield and current price in the market. Low P/E ratios are akin to high profit margins for a business. If you bought an entire company you would only recoup your investment once the earnings produced by the company exceed the price you paid. This simple fact is often overlooked when making an investment in the public markets, yet it is the basic tenet for all business owners. With that in mind, the following companies are some of the best in Chris Shumway’s portfolio right now.
Chris Shumway is the Founding Partner of Shumway Capital Partners (“SCP”), an investment management firm founded in 2001. SCP, which manages a multibillion dollar group of private investment funds, uses a private equity-like research model for public market investment on a global basis. Prior to forming SCP, Mr. Shumway was a Senior Managing Director at Tiger Management (1992-1999), an Analyst at Brentwood Associates (1990-1991), and an Analyst at Morgan Stanley & Co. (1988-1990). He received an M.B.A. from Harvard Business School (1993) and a B.S. from the McIntire School of Commerce at the University of Virginia (1988). Since founding Shumway Capital in 2002, his Ocean Fund Ltd has produced a gain of 14.3% a year (as of March 2009).
Recently, Shumway Capital Partners was ranked #11 in Barron's top 100 hedge fund rankings for 2009; an impressive feat. Barron's list is ranked according to a rolling 3 year annualized return and Shumway has seen a 28.7% annualized performance by this metric.
Shumway's investment criteria is not as talked about as mutual fund managers, other hedge fund managers, or his former boss Julian Robertson who has been quoted as saying "our mandate is to find the 200 best companies in the world and invest in them, and find the 200 worst companies in the world and go short on them. If the 200 best don't do better than the 200 worst, you should probably be in another business." Can we then assume that Chris Shumway follows a similar pattern when finding stocks?
Robertson used a very personal approach to investing. In TMG, Robertson would get input from his analysts and make all the investment decisions. Some say that Robertson was a macro trader, and often rode worldwide trends. He often argued against using fundamentals, a position that well might have led to the poor performance and liquidation of his Tiger funds in 2000. His investment style, about which there is very little written, consisted of a "smart idea, grounded on exhaustive research, followed by a big bet." Not exactly a framework that would work for the general public and not exactly one that I agree with. However, with 18 years of amazing returns in the market, it's hard to argue against his performance. The question is did Chris Shumway pick up the same type of "personalized approach" or not?
Here's what we know about Shumway Capital Partners as of December 31, 2009.
#1 The fund has 50 stocks
#2 The fund is valued at $8.55 Billion
#3 The fund is heavily weighted in Technology, Financials, Consumer Services, and Health Care.
With that in mind, there has been a trend away from Technology, Financials, and Health Care and towards Consumer Services and Basic Materials over the last few quartes. In late 2008, he did say "that buying stocks that were down largely due to hedge fund liquidations would be a winning strategy longer-term."
http://www.gurufocus.com/ListGuru.php?GuruName=Chris+Shumway
Five of Chris Shumway’s Best Low P/E Stocks:
No. 1: Goldman Sachs Group (GS, Financial), Weightings: 0.94% - 478,309 Shares
No. 2: Freeport McMoran (FCX, Financial), Weightings: 2.87% - 3,056,849 Shares
No. 3: Pfizer Inc. (PFE, Financial), Weightings: 3.65% - 17,165,854 Shares
No. 4: Research In Motion (RIMM, Financial), Weightings: 0.05% - 67,300 Shares
No. 5: AOL Inc. (AOL, Financial), Weightings: 0.23% - 842,437 Shares
No. 1: Goldman Sachs Group (GS)
Goldman Sachs is a global investment banking and securities firm, providing a full range of investing, advisory and financing services worldwide to a substantial and diversified client base, which includes corporations, financial institutions, governments, and high net worth individuals. Goldman Sachs Group Inc. The has a market cap of $75.46 billion; its shares were traded at around $143.23 with a P/E ratio of 5.98 and P/S ratio of 1.46. The dividend yield of Goldman Sachs Group Inc. The stocks is 0.98%. Goldman Sachs Group Inc. They had an annual average earnings growth of 12.7% over the past 10 years.
After being brought before Congress to testify about trading activities in April, Goldman Sachs' stock has dropped precipitously. Now trading just 5% off its 52 week low, the stock looks mispriced. Forward earnings look to come in around $19.53 per share. That gives the stock a 14% earnings yield.
Chris Shumway owns 478,309 shares as of 12/31/2010, which accounts for 0.94% of the $8.55 billion portfolio.
No. 2: Freeport McMoran (FCX)
Freeport-McMoRan Copper & Gold Inc. (FCX), through its wholly owned subsidiary, Phelps Dodge Corporation (Phelps Dodge) is a copper, gold and molybdenum mining company. Its portfolio of assets includes the Grasberg minerals district in Indonesia, which contains the single recoverable copper reserve and the single gold reserve; mining operations in North and South America, and the Tenke Fungurume minerals district in the Democratic Republic of Congo (DRC). As of December 31, 2009, consolidated recoverable proven and probable reserves totaled 104.2 billion pounds of copper, 37.2 million ounces of gold, 2.59 billion pounds of molybdenum, 270.4 million ounces of silver and 0.78 billion pounds of cobalt.FCX has a market cap of $30.02 billion; its shares were traded at around $69.72 with a P/E ratio of 9.05 and P/S ratio of 2. The dividend yield of Freeport-McMoRan Copper & Gold Inc. stocks is 0.86%.
This could very easily be a macroeconomic trade with the cost of raw materials become more valuable as the debt levels continue to rise around the world.
Chris Shumway owns 3,056,849 shares as of 12/31/2010, which accounts for 2.87% of the $8.55 billion portfolio. Plus, the stock does offer a very high earnings yield (12.5%) based on the forward earnings estimates.
No. 3: Pfizer Inc. (PFE)
Pfizer Inc is a research-based, global pharmaceutical company that discovers and develops innovative, value-added products that improve the quality of life of people around the world and help them enjoy longer, healthier, and more productive lives. Pfizer Inc has a market cap of $130.7 billion; its shares were traded at around $16.2 with a P/E ratio of 7.79 and P/S ratio of 2.61. The dividend yield of Pfizer Inc stocks is 4.44%. Pfizer Inc had an annual average earning growth of 1.8% over the past 10 years.
Just 2 points of its 52 week low, Pfizer offers what seems to be a very good earnings yield going forward (13.70%) based on 2010 EPS Estimates of $2.18.
Chris Shumway owns 17,165,854 shares as of 12/31/2010, which accounts for 3.65% of the $8.55 billion portfolio.
No. 4: Research In Motion (RIMM)
RESEARCH IN MOTION is a world leader in the mobile communications market and has a history of developing breakthrough wireless solutions. RIM’s portfolio of products, services and embedded technologies are used by organizations worldwide and include the BlackBerry wireless solution, the RIM Wireless Handheld product line, software development tools and other software and hardware.The BlackBerry maker has a market cap of $36.88 billion; its shares were traded at around $66.16 with a P/E ratio of 15.11 and P/S ratio of 2.47.
RIM is in the hyper competive field of mobile devices and is still the leader in smartphones, with Apple close behind them. However, looking at the company's valuation, it's much more attractive than Apple's with a forward earnings estimate of $5.43 per share, the company boasts a yield 9%. Apple's yield? 5%!
Chris Shumway owns 67,300 shares as of 12/31/2010, which accounts for 0.05% of the $8.55 billion portfolio.
No. 5: AOL Inc. (AOL)
AOL Inc. (AOL) is a global Web services company with a suite of brands and offerings. The Company’s business spans online content, products and services that it offers to consumers, publishers and advertisers. The Company markets its advertising offerings on both AOL Media and the Third Party Network under the brand AOL Advertising. The Company markets its offerings to publishers on the Third Party Network under the brand Advertising.com. AOL Inc has a market cap of $2.53 billion; its shares were traded at around $23.79 with a P/E ratio of 8.38 and P/S ratio of 0.78.
In July of last year, Time Warner repurchased Google's 5% interest in AOL and spun off the company in November of the same year. Fundamentally speaking, the company is fairly solid and seems to be earning money. If they can keep up the trend, in 2011 the stock will yield 6%.
Chris Shumway owns 842,437 shares as of 12/31/2010, which accounts for 0.23% of the $8.55 billion portfolio.
The stock highlighted above are only what I feel are the best ideas still mispriced within this guru's portfolio. No one cares more about your money than you do. And, by using GuruFocus.com anyone can find stocks that fit their personal investment criteria. Remember, that you shouldn’t always follow the guru’s stock picks, but instead learn from both their mistakes and their success to become a better investor.
GuruFocus provides real time information and insights of Investment Gurus such as Warren Buffett and Chuck Royce for Premium Members. If you are not a premium member, click here to sign up or upgrade. 7-Day Free Trial is available.
Chris Shumway is the Founding Partner of Shumway Capital Partners (“SCP”), an investment management firm founded in 2001. SCP, which manages a multibillion dollar group of private investment funds, uses a private equity-like research model for public market investment on a global basis. Prior to forming SCP, Mr. Shumway was a Senior Managing Director at Tiger Management (1992-1999), an Analyst at Brentwood Associates (1990-1991), and an Analyst at Morgan Stanley & Co. (1988-1990). He received an M.B.A. from Harvard Business School (1993) and a B.S. from the McIntire School of Commerce at the University of Virginia (1988). Since founding Shumway Capital in 2002, his Ocean Fund Ltd has produced a gain of 14.3% a year (as of March 2009).
Recently, Shumway Capital Partners was ranked #11 in Barron's top 100 hedge fund rankings for 2009; an impressive feat. Barron's list is ranked according to a rolling 3 year annualized return and Shumway has seen a 28.7% annualized performance by this metric.
Shumway's investment criteria is not as talked about as mutual fund managers, other hedge fund managers, or his former boss Julian Robertson who has been quoted as saying "our mandate is to find the 200 best companies in the world and invest in them, and find the 200 worst companies in the world and go short on them. If the 200 best don't do better than the 200 worst, you should probably be in another business." Can we then assume that Chris Shumway follows a similar pattern when finding stocks?
Robertson used a very personal approach to investing. In TMG, Robertson would get input from his analysts and make all the investment decisions. Some say that Robertson was a macro trader, and often rode worldwide trends. He often argued against using fundamentals, a position that well might have led to the poor performance and liquidation of his Tiger funds in 2000. His investment style, about which there is very little written, consisted of a "smart idea, grounded on exhaustive research, followed by a big bet." Not exactly a framework that would work for the general public and not exactly one that I agree with. However, with 18 years of amazing returns in the market, it's hard to argue against his performance. The question is did Chris Shumway pick up the same type of "personalized approach" or not?
Here's what we know about Shumway Capital Partners as of December 31, 2009.
#1 The fund has 50 stocks
#2 The fund is valued at $8.55 Billion
#3 The fund is heavily weighted in Technology, Financials, Consumer Services, and Health Care.
With that in mind, there has been a trend away from Technology, Financials, and Health Care and towards Consumer Services and Basic Materials over the last few quartes. In late 2008, he did say "that buying stocks that were down largely due to hedge fund liquidations would be a winning strategy longer-term."
http://www.gurufocus.com/ListGuru.php?GuruName=Chris+Shumway
Five of Chris Shumway’s Best Low P/E Stocks:
No. 1: Goldman Sachs Group (GS, Financial), Weightings: 0.94% - 478,309 Shares
No. 2: Freeport McMoran (FCX, Financial), Weightings: 2.87% - 3,056,849 Shares
No. 3: Pfizer Inc. (PFE, Financial), Weightings: 3.65% - 17,165,854 Shares
No. 4: Research In Motion (RIMM, Financial), Weightings: 0.05% - 67,300 Shares
No. 5: AOL Inc. (AOL, Financial), Weightings: 0.23% - 842,437 Shares
No. 1: Goldman Sachs Group (GS)
Goldman Sachs is a global investment banking and securities firm, providing a full range of investing, advisory and financing services worldwide to a substantial and diversified client base, which includes corporations, financial institutions, governments, and high net worth individuals. Goldman Sachs Group Inc. The has a market cap of $75.46 billion; its shares were traded at around $143.23 with a P/E ratio of 5.98 and P/S ratio of 1.46. The dividend yield of Goldman Sachs Group Inc. The stocks is 0.98%. Goldman Sachs Group Inc. They had an annual average earnings growth of 12.7% over the past 10 years.
After being brought before Congress to testify about trading activities in April, Goldman Sachs' stock has dropped precipitously. Now trading just 5% off its 52 week low, the stock looks mispriced. Forward earnings look to come in around $19.53 per share. That gives the stock a 14% earnings yield.
Chris Shumway owns 478,309 shares as of 12/31/2010, which accounts for 0.94% of the $8.55 billion portfolio.
No. 2: Freeport McMoran (FCX)
Freeport-McMoRan Copper & Gold Inc. (FCX), through its wholly owned subsidiary, Phelps Dodge Corporation (Phelps Dodge) is a copper, gold and molybdenum mining company. Its portfolio of assets includes the Grasberg minerals district in Indonesia, which contains the single recoverable copper reserve and the single gold reserve; mining operations in North and South America, and the Tenke Fungurume minerals district in the Democratic Republic of Congo (DRC). As of December 31, 2009, consolidated recoverable proven and probable reserves totaled 104.2 billion pounds of copper, 37.2 million ounces of gold, 2.59 billion pounds of molybdenum, 270.4 million ounces of silver and 0.78 billion pounds of cobalt.FCX has a market cap of $30.02 billion; its shares were traded at around $69.72 with a P/E ratio of 9.05 and P/S ratio of 2. The dividend yield of Freeport-McMoRan Copper & Gold Inc. stocks is 0.86%.
This could very easily be a macroeconomic trade with the cost of raw materials become more valuable as the debt levels continue to rise around the world.
Chris Shumway owns 3,056,849 shares as of 12/31/2010, which accounts for 2.87% of the $8.55 billion portfolio. Plus, the stock does offer a very high earnings yield (12.5%) based on the forward earnings estimates.
No. 3: Pfizer Inc. (PFE)
Pfizer Inc is a research-based, global pharmaceutical company that discovers and develops innovative, value-added products that improve the quality of life of people around the world and help them enjoy longer, healthier, and more productive lives. Pfizer Inc has a market cap of $130.7 billion; its shares were traded at around $16.2 with a P/E ratio of 7.79 and P/S ratio of 2.61. The dividend yield of Pfizer Inc stocks is 4.44%. Pfizer Inc had an annual average earning growth of 1.8% over the past 10 years.
Just 2 points of its 52 week low, Pfizer offers what seems to be a very good earnings yield going forward (13.70%) based on 2010 EPS Estimates of $2.18.
Chris Shumway owns 17,165,854 shares as of 12/31/2010, which accounts for 3.65% of the $8.55 billion portfolio.
No. 4: Research In Motion (RIMM)
RESEARCH IN MOTION is a world leader in the mobile communications market and has a history of developing breakthrough wireless solutions. RIM’s portfolio of products, services and embedded technologies are used by organizations worldwide and include the BlackBerry wireless solution, the RIM Wireless Handheld product line, software development tools and other software and hardware.The BlackBerry maker has a market cap of $36.88 billion; its shares were traded at around $66.16 with a P/E ratio of 15.11 and P/S ratio of 2.47.
RIM is in the hyper competive field of mobile devices and is still the leader in smartphones, with Apple close behind them. However, looking at the company's valuation, it's much more attractive than Apple's with a forward earnings estimate of $5.43 per share, the company boasts a yield 9%. Apple's yield? 5%!
Chris Shumway owns 67,300 shares as of 12/31/2010, which accounts for 0.05% of the $8.55 billion portfolio.
No. 5: AOL Inc. (AOL)
AOL Inc. (AOL) is a global Web services company with a suite of brands and offerings. The Company’s business spans online content, products and services that it offers to consumers, publishers and advertisers. The Company markets its advertising offerings on both AOL Media and the Third Party Network under the brand AOL Advertising. The Company markets its offerings to publishers on the Third Party Network under the brand Advertising.com. AOL Inc has a market cap of $2.53 billion; its shares were traded at around $23.79 with a P/E ratio of 8.38 and P/S ratio of 0.78.
In July of last year, Time Warner repurchased Google's 5% interest in AOL and spun off the company in November of the same year. Fundamentally speaking, the company is fairly solid and seems to be earning money. If they can keep up the trend, in 2011 the stock will yield 6%.
Chris Shumway owns 842,437 shares as of 12/31/2010, which accounts for 0.23% of the $8.55 billion portfolio.
The stock highlighted above are only what I feel are the best ideas still mispriced within this guru's portfolio. No one cares more about your money than you do. And, by using GuruFocus.com anyone can find stocks that fit their personal investment criteria. Remember, that you shouldn’t always follow the guru’s stock picks, but instead learn from both their mistakes and their success to become a better investor.
GuruFocus provides real time information and insights of Investment Gurus such as Warren Buffett and Chuck Royce for Premium Members. If you are not a premium member, click here to sign up or upgrade. 7-Day Free Trial is available.
