Bill Nygren likes to buy stocks with low P/E ratios, but he is also very cautious of not buying into a value trap. He manages the $5.8 billion Oakmark Fund (10–year average 7.26% ) and more concentrated $5.9 billion Oakmark Select Fund (10-year average 15.16%). These are the details of the buys and sells. during the seond quarter.
Bill Nygren buys Best Buy Co. Inc., Fedex Corporation, Capital One Financial Corp., sells Echostar Communications Corp., First Data Corp. during the 3-months ended 06/30/2007, according to the most recent filings of his investment company, Oak Mark Fund.
New Purchases: BBY, COF, FDX,
Added Positions: HD, MTG,
Reduced Positions: DNB, GPS,
Sold Out: DISH, FDC,
Added: Home Depot Inc. (HD, Financial)
Bill Nygren added to his holdings in Specialty Retailers company Home Depot Inc. by 157.16%. His purchase prices were between $37.68 and $39.52, with an estimated average price of $38.5. The impact to his portfolio due to this purchase was 2.06%. His holdings were 5,000,000 shares as of 06/30/2007. Home Depot Inc. has a market cap of $67.71 billion, its shares were traded at around $33.79 with with P/E ratio of 13.57 and P/S ratio of 0.74.
Regarding to Home Depot purchase, Bill Nygren said:
During the quarter we sold our position in Gap Stores to make room for Home Depot. Home Depot announced the sale of their building supply business, which captured a couple billion dollars of profit and also allowed new management to focus 100% on their retail business. In the same press release, Home Depot also announced a massive acceleration of their share repurchase plan – intending to spend $22 billion to repurchase 30% of their share base. With debt available on such attractive terms and with Home Depot stock trading at only 12 times expected earnings, we applaud the aggressive repurchase.
Added: MGIC Investment Corp. (MTG, Financial)
Bill Nygren added to his holdings in Property & Casualty Insurance company Mgic Investment Corp. by 81.91%. His purchase prices were between $56.56 and $65.64, with an estimated average price of $61.8. The impact to his portfolio due to this purchase was 0.36%. His holdings were 828,800 shares as of 06/30/2007.
MGIC Investment Corporation, through its subsidiary, provides private mortgage insurance to the home mortgage lending industry in the United States. The private mortgage insurance covers residential first mortgage loans etc. MGIC Investment Corp. has a market cap of $2.98 billion, its shares were traded at around $35.64 with with P/E ratio of 7.17 and P/S ratio of 1.98.
New Purchase: Best Buy Co. Inc. (BBY, Financial)
Bill Nygren initiated holdings in Specialty Retailers company Best Buy Co. Inc.. His purchase prices were between $44.7 and $48.98, with an estimated average price of $47.2. The impact to his portfolio due to this purchase was 1.55%. His holdings were 1,920,500 shares as of 06/30/2007.
Best Buy Co., Inc. operates as a specialty retailer of consumer electronics, home-office products, entertainment software, appliances, and related services primarily in the United States, Canada, and China. Best Buy Co. Inc. has a market cap of $20.89 billion, its shares were traded at around $43.87 with with P/E ratio of 16.23 and P/S ratio of 0.56.
With regard to his purchas of Best Buy Co., Bill Nygren commented:
Best Buy is the world’s largest retailer of consumer electronics. With over 1100 stores and sales approaching $40 billion, Best Buy has not only the largest market share in the U.S. but has more than twice the share of the number two competitor. And with their market share still under 25%, most of the market remains in the hands of less efficient competitors. Over the past five years, Best Buy has grown per-share sales and earnings at 12% and 18% respectively. We expect the consumer electronics category to continue to grow faster than other retail categories, and we also expect Best Buy’s aggressive expansion to increase their market share. Despite the track record and the long-term opportunity created by their competitive advantages, the stock fell from $60 last year to $44. Subtracting their $6 per share of excess cash (and its related interest income) Best Buy stock now sells at only 14 times expected earnings. The company has been an aggressive acquirer of their own stock so far this year, and it just announced plans to buy back an additional 25% of their outstanding shares. We believe that Best Buy is a superior business and therefore believe that investors will again reward it with a superior multiple.
New Purchase: Fedex Corporation (FDX, Financial)
Bill Nygren initiated holdings in Delivery Services company Fedex Corporation. His purchase prices were between $105.86 and $112.37, with an estimated average price of $109. The impact to his portfolio due to this purchase was 1.43%. His holdings were 750,000 shares as of 06/30/2007.
FedEx Corporation, together with its subsidiaries, provides transportation, e-commerce, and business services. It operates in four segments: FedEx Express, FedEx Ground, FedEx Freight, and FedEx Kinko's. FedEx Corporation has a market cap of $33.6 billion, its shares were traded at around $108.93 with with P/E ratio of 16.79 and P/S ratio of 0.96.
Bill Nygren made this comment about Fedex:
“Federal Express ~ when it absolutely, positively has to be there overnight.” We all know the commercials and have used the service. FedEx created the next-day package delivery business and today remains the industry leader. As in other network businesses, as FedEx grows, so too does its competitive advantage. The business clearly has an exceptional history, with sales and earnings-per-share growth over the past decade compounding at 9% and 16% respectively. We believe that the company’s international expansion and e-commerce will sustain its exceptional growth. Though the stock has been a good performer, the increase in FedEx stock has lagged behind the increases in earnings and our estimate of business value. The stock sells at 15 times estimated calendar 2008 earnings, a relatively trivial premium to the average business. We believe FedEx is a great business and, like many of our other great businesses, is now priced as if it were merely mediocre.
New Purchase: Capital One Financial Corp. (COF, Financial)
Bill Nygren initiated holdings in Consumer Finance company Capital One Financial Corp.. His purchase prices were between $72.75 and $80.72, with an estimated average price of $77.2. The impact to his portfolio due to this purchase was 0.95%. His holdings were 700,000 shares as of 06/30/2007.
Capital One Financial Corporation operates as the holding company for the Capital One Bank and Capital One, F.S.B, which offer various commercial banking services in the United States. Capital One Financial Corp. has a market cap of $28.6 billion, its shares were traded at around $66.72 with with P/E ratio of 10.41 and P/S ratio of 2.44.
Bill Nygren thinks Capital One Financial is undervalued:
Capital One is one of the largest credit card companies with one of the most recognized financial brands. In both 1999 and 2000, Capital One sold for $73 per share and had earnings–per-share between $2 and $3. Last quarter, Capital One again sold at $73, this time with over $7 of earnings. Back in 2000, Capital One was a high growth story. The credit card industry was expanding, and monoline credit card companies were taking market share from the banks. Today, growth in credit cards has slowed, and in a move to lower its funding costs, Capital One acquired two banks, which further reduced its expected rate of earnings growth. We believe investors have overreacted, now pricing the stock at a single digit P/E ratio on expected 2008 earnings. Returns in credit cards are still high, and retail financial service companies are actively consolidating. Capital One’s assets—composed of credit card receivables, auto loans, and retail banking deposits—are in high demand. We believe Capital One is worth more than its current price and that if investors don’t accord it a higher value, an acquirer will.
Reduced: Dun & Bradstreet Corp. (DNB, Financial)
Bill Nygren reduced to his holdings in Business Support Services company Dun & Bradstreet Corp. by 22.83%. His sale prices were between $90.07 and $103.64, with an estimated average price of $96.2. The impact to his portfolio due to this sale was 2.98%. Bill Nygren still held 2,071,900 shares as of 06/30/2007. Dun & Bradstreet Corp. has a market cap of $5.43 billion, its shares were traded at around $91.68 with with P/E ratio of 24.11 and P/S ratio of 3.40.
Reduced: Gap Inc. (GPS, Financial)
Bill Nygren reduced to his holdings in Apparel Retailers company Gap Inc. by 78.53%. His sale prices were between $17.57 and $19.26, with an estimated average price of $18.5. The impact to his portfolio due to this sale was 0.38%. Bill Nygren still held 2,066,700 shares as of 06/30/2007. Gap Inc. has a market cap of $14.38 billion, its shares were traded at around $17.39 with with P/E ratio of 20.38 and P/S ratio of 0.88.
Sold Out: Echostar Communications Corp. (DISH, Financial)
Bill Nygren sold out his holdings in Broadcasting & Entertainment company Echostar Communications Corp.. His sale prices were between $43.29 and $49.24, with an estimated average price of $46.3. The impact to his portfolio due to this sale was less than 0.01%.
EchoStar Communications Corp. has a market cap of $17.17 billion, its shares were traded at around $38.7 with with P/E ratio of 25.52 and P/S ratio of 1.66.
Sold Out: First Data Corp. (FDC, Financial)
Bill Nygren sold out his holdings in Business Support Services company First Data Corp.. His sale prices were between $32.26 and $32.77, with an estimated average price of $32.5. The impact to his portfolio due to this sale was less than 0.01%.
First Data Corporation provides electronic commerce and payment services for financial institutions, commercial establishments, and consumers principally in the United States. First Data Corp. has a market cap of $24.67 billion, its shares were traded at around $31.83 with with P/E ratio of 24.49 and P/S ratio of 3.18.
Bill Nygren buys Best Buy Co. Inc., Fedex Corporation, Capital One Financial Corp., sells Echostar Communications Corp., First Data Corp. during the 3-months ended 06/30/2007, according to the most recent filings of his investment company, Oak Mark Fund.
New Purchases: BBY, COF, FDX,
Added Positions: HD, MTG,
Reduced Positions: DNB, GPS,
Sold Out: DISH, FDC,
Added: Home Depot Inc. (HD, Financial)
Bill Nygren added to his holdings in Specialty Retailers company Home Depot Inc. by 157.16%. His purchase prices were between $37.68 and $39.52, with an estimated average price of $38.5. The impact to his portfolio due to this purchase was 2.06%. His holdings were 5,000,000 shares as of 06/30/2007. Home Depot Inc. has a market cap of $67.71 billion, its shares were traded at around $33.79 with with P/E ratio of 13.57 and P/S ratio of 0.74.
Regarding to Home Depot purchase, Bill Nygren said:
During the quarter we sold our position in Gap Stores to make room for Home Depot. Home Depot announced the sale of their building supply business, which captured a couple billion dollars of profit and also allowed new management to focus 100% on their retail business. In the same press release, Home Depot also announced a massive acceleration of their share repurchase plan – intending to spend $22 billion to repurchase 30% of their share base. With debt available on such attractive terms and with Home Depot stock trading at only 12 times expected earnings, we applaud the aggressive repurchase.
Added: MGIC Investment Corp. (MTG, Financial)
Bill Nygren added to his holdings in Property & Casualty Insurance company Mgic Investment Corp. by 81.91%. His purchase prices were between $56.56 and $65.64, with an estimated average price of $61.8. The impact to his portfolio due to this purchase was 0.36%. His holdings were 828,800 shares as of 06/30/2007.
MGIC Investment Corporation, through its subsidiary, provides private mortgage insurance to the home mortgage lending industry in the United States. The private mortgage insurance covers residential first mortgage loans etc. MGIC Investment Corp. has a market cap of $2.98 billion, its shares were traded at around $35.64 with with P/E ratio of 7.17 and P/S ratio of 1.98.
New Purchase: Best Buy Co. Inc. (BBY, Financial)
Bill Nygren initiated holdings in Specialty Retailers company Best Buy Co. Inc.. His purchase prices were between $44.7 and $48.98, with an estimated average price of $47.2. The impact to his portfolio due to this purchase was 1.55%. His holdings were 1,920,500 shares as of 06/30/2007.
Best Buy Co., Inc. operates as a specialty retailer of consumer electronics, home-office products, entertainment software, appliances, and related services primarily in the United States, Canada, and China. Best Buy Co. Inc. has a market cap of $20.89 billion, its shares were traded at around $43.87 with with P/E ratio of 16.23 and P/S ratio of 0.56.
With regard to his purchas of Best Buy Co., Bill Nygren commented:
Best Buy is the world’s largest retailer of consumer electronics. With over 1100 stores and sales approaching $40 billion, Best Buy has not only the largest market share in the U.S. but has more than twice the share of the number two competitor. And with their market share still under 25%, most of the market remains in the hands of less efficient competitors. Over the past five years, Best Buy has grown per-share sales and earnings at 12% and 18% respectively. We expect the consumer electronics category to continue to grow faster than other retail categories, and we also expect Best Buy’s aggressive expansion to increase their market share. Despite the track record and the long-term opportunity created by their competitive advantages, the stock fell from $60 last year to $44. Subtracting their $6 per share of excess cash (and its related interest income) Best Buy stock now sells at only 14 times expected earnings. The company has been an aggressive acquirer of their own stock so far this year, and it just announced plans to buy back an additional 25% of their outstanding shares. We believe that Best Buy is a superior business and therefore believe that investors will again reward it with a superior multiple.
New Purchase: Fedex Corporation (FDX, Financial)
Bill Nygren initiated holdings in Delivery Services company Fedex Corporation. His purchase prices were between $105.86 and $112.37, with an estimated average price of $109. The impact to his portfolio due to this purchase was 1.43%. His holdings were 750,000 shares as of 06/30/2007.
FedEx Corporation, together with its subsidiaries, provides transportation, e-commerce, and business services. It operates in four segments: FedEx Express, FedEx Ground, FedEx Freight, and FedEx Kinko's. FedEx Corporation has a market cap of $33.6 billion, its shares were traded at around $108.93 with with P/E ratio of 16.79 and P/S ratio of 0.96.
Bill Nygren made this comment about Fedex:
“Federal Express ~ when it absolutely, positively has to be there overnight.” We all know the commercials and have used the service. FedEx created the next-day package delivery business and today remains the industry leader. As in other network businesses, as FedEx grows, so too does its competitive advantage. The business clearly has an exceptional history, with sales and earnings-per-share growth over the past decade compounding at 9% and 16% respectively. We believe that the company’s international expansion and e-commerce will sustain its exceptional growth. Though the stock has been a good performer, the increase in FedEx stock has lagged behind the increases in earnings and our estimate of business value. The stock sells at 15 times estimated calendar 2008 earnings, a relatively trivial premium to the average business. We believe FedEx is a great business and, like many of our other great businesses, is now priced as if it were merely mediocre.
New Purchase: Capital One Financial Corp. (COF, Financial)
Bill Nygren initiated holdings in Consumer Finance company Capital One Financial Corp.. His purchase prices were between $72.75 and $80.72, with an estimated average price of $77.2. The impact to his portfolio due to this purchase was 0.95%. His holdings were 700,000 shares as of 06/30/2007.
Capital One Financial Corporation operates as the holding company for the Capital One Bank and Capital One, F.S.B, which offer various commercial banking services in the United States. Capital One Financial Corp. has a market cap of $28.6 billion, its shares were traded at around $66.72 with with P/E ratio of 10.41 and P/S ratio of 2.44.
Bill Nygren thinks Capital One Financial is undervalued:
Capital One is one of the largest credit card companies with one of the most recognized financial brands. In both 1999 and 2000, Capital One sold for $73 per share and had earnings–per-share between $2 and $3. Last quarter, Capital One again sold at $73, this time with over $7 of earnings. Back in 2000, Capital One was a high growth story. The credit card industry was expanding, and monoline credit card companies were taking market share from the banks. Today, growth in credit cards has slowed, and in a move to lower its funding costs, Capital One acquired two banks, which further reduced its expected rate of earnings growth. We believe investors have overreacted, now pricing the stock at a single digit P/E ratio on expected 2008 earnings. Returns in credit cards are still high, and retail financial service companies are actively consolidating. Capital One’s assets—composed of credit card receivables, auto loans, and retail banking deposits—are in high demand. We believe Capital One is worth more than its current price and that if investors don’t accord it a higher value, an acquirer will.
Reduced: Dun & Bradstreet Corp. (DNB, Financial)
Bill Nygren reduced to his holdings in Business Support Services company Dun & Bradstreet Corp. by 22.83%. His sale prices were between $90.07 and $103.64, with an estimated average price of $96.2. The impact to his portfolio due to this sale was 2.98%. Bill Nygren still held 2,071,900 shares as of 06/30/2007. Dun & Bradstreet Corp. has a market cap of $5.43 billion, its shares were traded at around $91.68 with with P/E ratio of 24.11 and P/S ratio of 3.40.
Reduced: Gap Inc. (GPS, Financial)
Bill Nygren reduced to his holdings in Apparel Retailers company Gap Inc. by 78.53%. His sale prices were between $17.57 and $19.26, with an estimated average price of $18.5. The impact to his portfolio due to this sale was 0.38%. Bill Nygren still held 2,066,700 shares as of 06/30/2007. Gap Inc. has a market cap of $14.38 billion, its shares were traded at around $17.39 with with P/E ratio of 20.38 and P/S ratio of 0.88.
Sold Out: Echostar Communications Corp. (DISH, Financial)
Bill Nygren sold out his holdings in Broadcasting & Entertainment company Echostar Communications Corp.. His sale prices were between $43.29 and $49.24, with an estimated average price of $46.3. The impact to his portfolio due to this sale was less than 0.01%.
EchoStar Communications Corp. has a market cap of $17.17 billion, its shares were traded at around $38.7 with with P/E ratio of 25.52 and P/S ratio of 1.66.
Sold Out: First Data Corp. (FDC, Financial)
Bill Nygren sold out his holdings in Business Support Services company First Data Corp.. His sale prices were between $32.26 and $32.77, with an estimated average price of $32.5. The impact to his portfolio due to this sale was less than 0.01%.
First Data Corporation provides electronic commerce and payment services for financial institutions, commercial establishments, and consumers principally in the United States. First Data Corp. has a market cap of $24.67 billion, its shares were traded at around $31.83 with with P/E ratio of 24.49 and P/S ratio of 3.18.
