Ken Fisher bought three financials as his top three new holdings in the first quarter, though he sold out or drastically reduced his position in several others, thus boosting his portfolio’s overall weighting in financials to 8.9% from 7.1% in the previous quarter. Fisher manages $43 billion and his Purisima Total Return Fund (PURIX, Financial) has returned 38.2% over the last 10 years, compared to 34.9% for the S&P.
His top three new financial buys for the quarter are: Morgan Stanley (MS), Barclay Plc Adr (BCS, Financial) and HDFC Bank Ltd. (HDB). He also bought shares of Tata Motors Adr (TTM, Financial) and Gerdau SA Adr (GGB, Financial) as his fourth and fifth largest purchases.
In his February Forbes column, Fisher predicted a great year for stocks. “We will soon begin the fourth year of this bull market. According to my research, fourth years have averaged 20% returns and sometimes have been much bigger. So it is best to think of the directionless daze the market Ă‚Âsuffered in 2011 as the pause that Ă‚Ârefreshes before the bull resumes,” he wrote.
Morgan Stanley (MS)
Fisher bought 12,434,409 shares of Morgan Stanley, the sixth-largest U.S. bank by assets, in the first quarter at an average price near $19.
Morgan Stanley’s revenue dropped from $58.4 billion in 2008 to $30.1 billion in 2009, but has been increasing for the past two years to reach $39.3 billion in 2011. Earnings declined slightly to $4.1 billion in 2011 compared to $4.7 billion in 2010. The bank’s cash has declined for the past three years, but is still $345.6 billion in 2011, higher than its pre-2008 level. “These results fell short of expectations, reflecting muted market activity and the negative impacts associated with two significant actions to further strengthen our financial foundation, Morgan Stanley Chairman and Chief Executive James Gorman said in his annual letter.
In 2011, Gorman’s compensation was 25% lower than the previous year, at $10.5 million, due to the fact that “the company did not fully meet certain 2011 performance priorities,” the bank said in an SEC filing.
In the first quarter of 2012, Morgan Stanley reported net revenues of $6.9 billion compared to $7.6 billion the year previously, reflecting the negative impact of $2.0 billion from the tightening of its debt-related credit spreads (DVA). It also reported a net loss of $0.06 per share, including discontinued operations, compared with net income of $0.50 per share the year ago period.
Barclay Plc-ADR (BCS)
Fisher bought 15,579,841 shares of Barclay Plc, the third largest British bank by market value, in the first quarter at an average of $14.52 per share.
Barclays revenue has increased for the last five years, including through the financial crisis, to reach almost $33 billion in 2011, compared to $32.5 billion in 2010. Net income declined annually for the last three years, to $3 billion in 2011, compared to $3.6 billion in 2010, its lowest levels in five years.
In the first quarter Barclays’ profit before tax increased 22% to £2.5 billion, driven by increases in both retail and business banking and corporate and investment banking, as well as in its non-investment bank business. Its adjust return on average shareholders’ equity increased to 12.2%, compared to 10.2% in 2011, as well as adjusted return on tangible shareholders’ equity increased to 14.3%, compared to 12.3% in 2011.
The bank continued to pay a 1.0p dividend in the first quarter, unchanged from a year ago. Barclays has a P/E ratio of 8.9, compared to the industry average of 10.3.
HDFC Bank Ltd. (HDB)
Fisher bought 1,594,190 shares of HDFC Bank in the first quarter at an average price near $32.50. HDFC is an Indian financial services company with 1,986 branches in 996 cities and was the first bank to launch an International Debit Card in India.
HDFC Bank’s revenue has grown at a rate of 28.3% annually over the last 10 years, and EBITDA at a rate of 24.7% over the same time period. In the last 12 months, revenue increased 28.8%, EBITDA increased 50.8% and free cash flow increased 90.7%. Return on equity and return on assets also both increased annually for the last three years, reaching 11.8% and 1.4%, respectively, in 2011.
HDFC pays a dividend of 15 cents, which it has increased every year since 2006, and a P/E ratio of 26.4.
Tata Motors Adr (TTM)
Fisher bought 791,522 shares of Tata Motors in the first quarter at an average price near $25 per share. Tata Motors stock has surged 76.5% year to date.
Tata Motors is India’s largest automobile company and the world’s fourth-largest truck and bus manufacturer. In 2008, it acquired Jaguar Land Rover.
The company’s stock boost at the beginning of the year came as the company reported increased financial results for its third quarter ended December 2011. Tata saw net revenue increased 18.2% year over year to $2.5 billion. Net income increased to $34 billion, compared o $26.4 billion the previous year. Sales improvements were driven by sales of the Nano, its compact cars unit, UV and Vans. In March, the company’s global sales were even better, rising 26% to 139,655 vehicles.
Over the last five years, Tata has grown revenue at a rate of 28.7% annually and EBITDA at a rate of 73.3%. The company has a P/E of 45.48.
Gerdau SA ADR (GGB)
Fisher bought 1,607,898 shares of his fifth-largest new buy, Gerdau, in the first quarter at an average price near $10. Gerdau is a Brazil-based holding company of subsidiaries involved in steel manufacture and sales and its stock is down almost 22% year to date.
Gerdau has been growing its revenue at an annual rate of 20.4% over the last 10 years and EBITDA at 15.4%. In 2011, in free cash flow swung to a loss of $144 million, compared to a gain of $1.6 billion in 2010.
In the fourth quarter ended Dec. 31, 2011, Gerdau’s net sales increased 16% year over year to $9 billion, and net income increased 12% to $472 million on greater net sales per ton sold in all business operations. On the global 2012 outlook for steel, Gerdau is “cautiously optimistic,” saying in its quarterly letter, “Worldsteel estimates that by 2012, apparent steel consumption in developed countries will still be approximately 15% below 2007 levels. On the other hand, for emerging economies, consumption should be 44% greater than what was recorded in 2007. According to the projections for 2012, emerging economies are expected to account for approximately 73% of the global steel demand. In 2007, this rate was 61%.”
See Ken Fisher’s portfolio here.
His top three new financial buys for the quarter are: Morgan Stanley (MS), Barclay Plc Adr (BCS, Financial) and HDFC Bank Ltd. (HDB). He also bought shares of Tata Motors Adr (TTM, Financial) and Gerdau SA Adr (GGB, Financial) as his fourth and fifth largest purchases.
In his February Forbes column, Fisher predicted a great year for stocks. “We will soon begin the fourth year of this bull market. According to my research, fourth years have averaged 20% returns and sometimes have been much bigger. So it is best to think of the directionless daze the market Ă‚Âsuffered in 2011 as the pause that Ă‚Ârefreshes before the bull resumes,” he wrote.
Morgan Stanley (MS)
Fisher bought 12,434,409 shares of Morgan Stanley, the sixth-largest U.S. bank by assets, in the first quarter at an average price near $19.
Morgan Stanley’s revenue dropped from $58.4 billion in 2008 to $30.1 billion in 2009, but has been increasing for the past two years to reach $39.3 billion in 2011. Earnings declined slightly to $4.1 billion in 2011 compared to $4.7 billion in 2010. The bank’s cash has declined for the past three years, but is still $345.6 billion in 2011, higher than its pre-2008 level. “These results fell short of expectations, reflecting muted market activity and the negative impacts associated with two significant actions to further strengthen our financial foundation, Morgan Stanley Chairman and Chief Executive James Gorman said in his annual letter.
In 2011, Gorman’s compensation was 25% lower than the previous year, at $10.5 million, due to the fact that “the company did not fully meet certain 2011 performance priorities,” the bank said in an SEC filing.
In the first quarter of 2012, Morgan Stanley reported net revenues of $6.9 billion compared to $7.6 billion the year previously, reflecting the negative impact of $2.0 billion from the tightening of its debt-related credit spreads (DVA). It also reported a net loss of $0.06 per share, including discontinued operations, compared with net income of $0.50 per share the year ago period.
Barclay Plc-ADR (BCS)
Fisher bought 15,579,841 shares of Barclay Plc, the third largest British bank by market value, in the first quarter at an average of $14.52 per share.
Barclays revenue has increased for the last five years, including through the financial crisis, to reach almost $33 billion in 2011, compared to $32.5 billion in 2010. Net income declined annually for the last three years, to $3 billion in 2011, compared to $3.6 billion in 2010, its lowest levels in five years.
In the first quarter Barclays’ profit before tax increased 22% to £2.5 billion, driven by increases in both retail and business banking and corporate and investment banking, as well as in its non-investment bank business. Its adjust return on average shareholders’ equity increased to 12.2%, compared to 10.2% in 2011, as well as adjusted return on tangible shareholders’ equity increased to 14.3%, compared to 12.3% in 2011.
The bank continued to pay a 1.0p dividend in the first quarter, unchanged from a year ago. Barclays has a P/E ratio of 8.9, compared to the industry average of 10.3.
HDFC Bank Ltd. (HDB)
Fisher bought 1,594,190 shares of HDFC Bank in the first quarter at an average price near $32.50. HDFC is an Indian financial services company with 1,986 branches in 996 cities and was the first bank to launch an International Debit Card in India.
HDFC Bank’s revenue has grown at a rate of 28.3% annually over the last 10 years, and EBITDA at a rate of 24.7% over the same time period. In the last 12 months, revenue increased 28.8%, EBITDA increased 50.8% and free cash flow increased 90.7%. Return on equity and return on assets also both increased annually for the last three years, reaching 11.8% and 1.4%, respectively, in 2011.
HDFC pays a dividend of 15 cents, which it has increased every year since 2006, and a P/E ratio of 26.4.
Tata Motors Adr (TTM)
Fisher bought 791,522 shares of Tata Motors in the first quarter at an average price near $25 per share. Tata Motors stock has surged 76.5% year to date.
Tata Motors is India’s largest automobile company and the world’s fourth-largest truck and bus manufacturer. In 2008, it acquired Jaguar Land Rover.
The company’s stock boost at the beginning of the year came as the company reported increased financial results for its third quarter ended December 2011. Tata saw net revenue increased 18.2% year over year to $2.5 billion. Net income increased to $34 billion, compared o $26.4 billion the previous year. Sales improvements were driven by sales of the Nano, its compact cars unit, UV and Vans. In March, the company’s global sales were even better, rising 26% to 139,655 vehicles.
Over the last five years, Tata has grown revenue at a rate of 28.7% annually and EBITDA at a rate of 73.3%. The company has a P/E of 45.48.
Gerdau SA ADR (GGB)
Fisher bought 1,607,898 shares of his fifth-largest new buy, Gerdau, in the first quarter at an average price near $10. Gerdau is a Brazil-based holding company of subsidiaries involved in steel manufacture and sales and its stock is down almost 22% year to date.
Gerdau has been growing its revenue at an annual rate of 20.4% over the last 10 years and EBITDA at 15.4%. In 2011, in free cash flow swung to a loss of $144 million, compared to a gain of $1.6 billion in 2010.
In the fourth quarter ended Dec. 31, 2011, Gerdau’s net sales increased 16% year over year to $9 billion, and net income increased 12% to $472 million on greater net sales per ton sold in all business operations. On the global 2012 outlook for steel, Gerdau is “cautiously optimistic,” saying in its quarterly letter, “Worldsteel estimates that by 2012, apparent steel consumption in developed countries will still be approximately 15% below 2007 levels. On the other hand, for emerging economies, consumption should be 44% greater than what was recorded in 2007. According to the projections for 2012, emerging economies are expected to account for approximately 73% of the global steel demand. In 2007, this rate was 61%.”
See Ken Fisher’s portfolio here.
