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Andreas Halvorsen Buys Carter's and Mario Gabelli Buys Zoll Medical

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Apr 02, 2012
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GuruFocus Real Time Picks alerts members to the most recent trades made by gurus that own 5% or more of a company, in the times between their quarterly filings. According to the feature, Andreas Halvorsen increased his stake in Carters Inc. (CRI, Financial) to 5.51% of the company, and Mario Gabelli bought 2.6% of Zoll Medical (ZOLL, Financial).

Andreas Halvorsen is founder of hedge fund Viking Global and one of the former protégés of hedge fund pioneer Julian Robertson, dubbed “tiger cubs.” His firm has been quite successful, returning 119% between June 2005 and March 2010, compared to 11% for the MSCI World Index.

Halvorsen’s new add, Carter’s Inc., is an infant and children’s retailer that owns the popular Carter’s and OshKosh B’gosh brands. Its two other brands are available at Walmart (WMT, Financial) and Target (TGT, Financial).

Initially, Halvorsen bought 2,008,701 shares of Carter’s at an average price of $31 per share in the third quarter of 2011, and added 448,199 more at an average price of $37 per share in the fourth quarter 2011. On March 20, Halvorsen increased his holding of Carter’s by 32.14% at approximately $48 per share. He had to report his latest add because it pushed his ownership of the company above the 5% ownership threshold for reporting – from about 4.2% to 5.5%.

Carter’s has a history of profitability and sustained growth. Its revenue per share over the last 10 years increased at an annual rate of 12.9%, EBITDA at an annual rate of 14.6% and free cash flow at a rate of 9.1%. The $2.92 billion market cap company’s stock has also gained 70% over the last year to close at $49.52 on Monday.

Halvorsen bought the stock shortly after it jumped 11.2% from February 18 to 19 when it announced its fourth quarter and full-year operating results. Fourth quarter net sales had increased 22% and full year net sales increased 21%. The company’s efforts to extend reach both in the U.S. and international markets contributed to the increase. Earnings were less positive – down 21% in the fourth quarter and 15% for the full year, greatly impacted by abnormally high cotton prices. Prices are expected to remain high through spring 2012 and drop in the second half of 2012.

Carter’s is attractive to several value investors, with Oakmark Equity & Income I, T. Rowe Price New Horizons and Royce Premier Investments among its top owners.

Mario Gabelli is the founder, chairman and CEO of $30 billion investment firm GAMCO Investors, where he has returned 11.8% since inception. His most recent buy is of Zoll Medical Co. (ZOLL, Financial), which designs, manufactures and markets a line of proprietary noninvasive cardiac resuscitation devices, defibrillators, electrodes, EMS data management solutions and other medical devices.

Gabelli had recently been taking profits from his tiny position 11,900-share position in Zoll that he purchased in the third quarter of 2010 at approximately $27 per share. By July of 2011, the stock had reached nearly $70 per share. He had eliminated his position by the third quarter of 2011.

On March 29, Gabelli opened another position in the rapidly gaining stock, buying 580,200 shares at approximately $93 per share.

A tender offer for Zoll was made by Asahi Kasei Corp. (a Japanese chemical manufacturer) on March 26 that is now being investigated by dissatisfied shareholders. Asahi Kasei offered Zoll $93 per share in cash for all of its outstanding shares, or $2.21 billion, but some believe a more accurate price target for the shares is $100.

The boards of directors of both companies have approved the acquisition, but it is still pending shareholder approval. If it is granted, the transaction should close in the second calendar quarter of 2012.

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Also see the portfolio of Andreas Halvorsen and portfolio of Mario Gabelli.

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