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David Williams: Top Holdings

January 09, 2012 | About:
David Williams is the manager of the Columbia Value & Restructuring Fund.

He makes long-term investments, typically contrarian in nature, and he sticks to his course through headwinds. He invests in deep value stocks but also in some growth stocks, when he can pick them up at the right price. Williams makes large commitments to particular sectors that he feels are under-valued. This can lead the fund's performance to deviate significantly from the overall stock market.

Jack Truman of Hedgephone said in an email, “David Williams is arguably the mutual fund world's top value investor according to his 15-year track record. A humble investment pro with a tremendous knack for finding value, he is not afraid to invest in companies that are undergoing significant restructuring operations as his strategy takes advantage of investor skepticism and market mispricings of good businesses undergoing short-term headwinds.”

In the office I work we use GuruFocus to study the top holdings of the best hedge fund investors. We use their ideas and research

Murphy Oil Corporation (NYSE:MRO):

Murphy Oil is an integrated oil and gas company with production from fields in the U.S., Canada, Malaysia, U.K., and Ecuador.

Murphy has ample E&P growth projects under way to drive production growth, with new field startups in the Gulf of Mexico, Malaysia, and Congo and development prospects in Canada. In addition, Murphy's operations in the Kikeh and Sarawak fields in Malaysia are becoming a major source of earnings growth.

Harris Corporation(NYSE:HRS):

Harris sells communications products and services to government and commercial customers in more than 150 countries. It is involved in RF communications (accounting for 39% of sales), government communications (33%), and integrated network solutions (28%). Moreover, Harris has operations worldwide and employs more than 15,800 people.

In terms of financial results, HRS generates solid operating cash flow and manageable debt. Recent wins in the public safety market for RF communications could help convince other potential customers to choose Harris. Acquisitions in the energy communications space will be helped by increasing offshore exploration and production.

Through its contracts with the U.S. government, Harris can fund research and development for product development. Its R&D budget totaled $3 billion during the last three years while only $818 million was internally funded. New products or services can be sold to both existing and future customers.

Eaton Corp. (NYSE:EAT):

Eaton provides power management solutions to diversified industrial customers, including electrical systems, hydraulics components, aerospace fuel systems, and truck and auto powertrain systems. Products include UPS systems, hydraulic pumps, cylinders, clutches, and circuit breakers.

Eaton enjoys solid financial health with modest financial leverage and strong free cash flow generation. The firm ended the year with debt/cap of 32% and debt/EBITDA of about 2 times. The firm generated EBITDA coverage of interest expense of over 12 times, giving the firm strong financial flexibility.

Commercially speaking, Eaton's expansion has given it access to growing markets such as China,where the company is capitalizing on the quickly emerging auto market. The company's operating leverage, combined with recent cost-cutting, will provide a powerful stimulus to profits going forward.

Last but not least, ETN has been developing technologies which will foster growth.

AECOM Technology Corporation (ACOM):

AECOM is a global engineering and design firm with a large footprint in Asia and the U.S. The company focuses on providing professional engineering services to military entities, transportation facilities, environmental agencies and energy companies. It is active in consolidating smaller niche players and expanding its professional and technical service territories.

The company is permanently developing infrastructure projects that position it well to benefit from the global infrastructure expansion cycle.

As regards acquisitions, its track record will enable it to acquire niche players.

Cisco Systems Inc. (NASDAQ:CSCO):

Cisco Systems is the world's leading supplier of data networking equipment and software. Its products include routers, switches, access equipment, and network-management software that allow data communication among dispersed computer networks. The firm has also entered newer markets, such as video conferencing, web-based collaboration, and data center servers.

Cisco's balance sheet is extremely healthy, with far more cash than debt, and free cash flows average of more than 20% of revenue over the past several years. Cisco generated double-digit year-over-year order growth across each of its key customer segments and geographies.

As Internet traffic grows, demand for Cisco's networking gear will grow too. UCS servers are showing early signs of success. Although they now have relatively low gross margins, these servers will potentially expand Cisco's footprint in its customers' data centers.

Cisco Systems Inc. has a market cap of $84.9 billion; its shares were traded at around $15.435 with a P/E ratio of 10.8 and P/S ratio of 2.1. The dividend yield of Cisco Systems Inc. stocks is 1.6%. Cisco Systems Inc. had an annual average earnings growth of 23% over the past 10 years.

Rating: 4.0/5 (7 votes)


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