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Dianne Tordillo
Dianne Tordillo
Articles (179)  | Author's Website |

Brian Rogers’ Biggest Buys for the T. Rowe Price Equity Income Fund – Q4 2012 Update

January 29, 2013 | About:

Guru Brian Rogers, who manages the $24 billion T. Rowe Price Equity Income Fund, has reported a total of 33 transactions for his fourth quarter 2012 portfolio update. The update consists of 11 stake increases, 7 new buys, 6 stake reductions and 9 sales of his entire stake in companies.

Established in 1985, the fund has returned an annual average of 10.69 percent since inception. In the last year, it beat the S&P 500’s 16 percent, by 1.25 percent.

With 125 stocks in the portfolio, Rogers’ top holdings remain: General Electric (GE), JPMorgan Chase (JPM), Chevron Corp. (CVX), Exxon Mobil (XOM) and Wells Fargo (WFC).

Out of Rogers’ seven new buys, Norfolk Southern Corp. (NYSE:NSC), Apache Corp. (NYSE:APA) and Bank of New York Mellon (NYSE:BK) were his highest-costing stocks.

Norfolk Southern Corp. (NYSE:NSC)

Operating about 20,000 route miles of rail in the U.S., transportation company Norfolk Southern Corp. serves as a major rail carrier of coal, automotive and industrial products. Its presence is prevalent in the eastern part of the country, spanning 22 states plus the District of Columbia.

Buying 4 million shares at $62.04 on average, Rogers’ Norfolk Southern transaction came up to more than $247 million. The buy sparked a 1.1 percent holding in his portfolio, equivalent to 1.27 percent of Norfolk Southern’s outstanding shares.

Although appearing new in last year’s fourth quarter, Rogers actually had a small holding of the company in the second quarter of 2009, when the stock’s average trading price was $37. By the next quarter, Norfolk Southern spiked to $44, resulting to Rogers quickly selling all 500,000 of his shares.

In the company’s 2012 fourth quarter report, Norfolk Southern revealed a slight decline in coal shipments in the last three months of the year. Improved volumes in chemicals, auto and housing, however, made up for the decline.

One thing that Norfolk Southern CEO emphasized in the report was the company’s plan to invest $2 billion in capital improvements, serving the company’s operational efficiency, safety performance and overall future growth.

Yesterday, Norfolk Southern further elaborated on these investments in a press release. Portions of the $2 billion will be dedicated to the following projects: $831 million for roadway improvements such as rail replacements, crossties and bridges; $420 million to acquire new locomotives, rebuild and upgrade existing units; $229 million for efforts to implement positive train control; and $84 million for infrastructure improvements to increase main line capacity and accommodate traffic growth – to name a few.

With this buy of Norfolk Southern, Rogers joins other Gurus like Warren Buffett and Carl Icahn, who advocate their support in the rail transportation businesses through their solid positions in rail companies Burlington Northern Santa Fe and American Railcar Industries (ARII), respectively.

1359475911145.pngNSC data by GuruFocus.com

Gaining about 34 percent in the last five years, Norfolk Southern’s stock has seen sizable gains in its recent years. In the last three years, its market value increased by 45 percent.

Ending its first month of 2013 with a 14.54 percent gain, Norfolk Southern trades at $70.37 this morning, up 0.61 percent.

View Norfolk Southern Corp.’s 10-Year Financials.

Apache Corp. (NYSE:APA)

Headquartered in Houston, Apache Corp. is an oil and gas exploration company with a market capitalization of $32.87 billion. Its operations spans beyond the U.S., to Canada, Egypt, the UK, Australia and Argentina.

Rogers’ new holding of Apache is worth more than $204 million, totaling 2.6 million shares. Bought at an average price of $80, Rogers’ stake represents 0.66 percent of Apache’s outstanding shares, and is 0.88 percent of the T. Rowe Price Equity Income Fund.

Having long encouraged America’s use of natural gas, Apache announced partnering with oilfield services companies Halliburton (HAL) and Schlumberger (SLB) to find ways to use natural gas to power hydraulic fracturing.

Apache announced the initiative earlier this month in a feature article published by the company, noting that hydraulic fracturing is the most energy-intensive process employed in the oil and gas industries. To Apache, finding a way to increase the 1 percent that uses natural gas for this process will save the U.S. billions of barrels of imported oil, while cutting fuel costs.

“When I approached Halliburton and told them Apache wanted to do this, they told me that the reason that frac spreads that moved every week did not run on natural gas was due to the complexity of the natural gas supply and support infrastructure,” Mike Bahorich, Apache’s executive vice president of technology, said in the article. “I also contacted Schlumberger. It didn’t take long for both companies to call back and tell me it could be done.”

Apache also supports using compressed natural gas in vehicles, and other “green” initiatives. Last week, it announced its donation of Memorial Park’s 3-millionth tree in Houston.

1359487083237.pngAPA data by GuruFocus.com

From its three-year low of $75 in November, Apache is currently seeing a slow recovery as it has risen a couple of points over the past months. Since the start of 2013, Apache has gained 8.67 percent in market value.

Today it trades at $84.77, up 1.24 percent.

View Apache Corp.’s 10-Year Financials.

Bank of New York Mellon (NYSE:BK)

A global investments company, Bank of New York Mellon helps its clients manage and service financial assets from 36 countries. The Bank of New York Mellon has over $1.4 trillion in assets under management

Rogers’ new holding comes up to 5.85 million Bank of New York Mellon shares, worth more than $150 million. He bought the stock at $24.31 on average, the stake representing a meager 0.65 percent of his portfolio.

Although a new buy for Rogers’ fourth quarter, he previously owned shares of Bank of New York Mellon for several years, before he sold out the stock in the third quarter of 2012.

In 2009, Rogers had 7 million shares, his largest holding amount in five years. At the time, its average price was $24.72, before it rose to $30 in 2011. By the time Rogers purchased the stock again recently, Bank of New York Mellon’s average price has deflated back down to $24.31.

Last week, Bank of New York Mellon reported its fourth quarter earnings. In the three months, its assets under management rose 10 percent comparable to year over year data; net long-term inflows reached $14 billion for the quarter out of the $56 billion made for the entire year. Additionally, Bank of New York Mellon made $622 million in earnings for the quarter, and 19 percent in return on tangible common equity.

In the last five years, the company’s stock has lost 40.46 percent in market value; in three years it lost 7.13 percent in three years. For 2012, however, the Bank of New York Mellow saw a turnaround. The stock went from trading around $20 at the end of January, to $26 at the end of December.

1359487119757.pngBK data by GuruFocus.com

Gerald Hassell, Bank of New York Mellon chairman and CEO, noted the stock’s price improvement in the earnings report.

“We benefited from the improvement in market values and, more importantly, from our relentless focus on generating organic growth with our broad client base,” he said. “We are also driving our operational excellence initiatives to improve our efficiency and help mitigate the impact on our high margin revenues due to the low interest rate environment and tepid capital markets activity.”

After repurchasing $1.1 billion worth of its common shares, Bank of New York Mellon proceeded to maintain a strong balance sheet and capital ratios throughout 2012. The company acquired 49.8 million of its own shares for the year.

Today, the stock trades at $27.10, up 0.04 percent.

Besides Rogers, Gurus who hold the stock include Warren Buffett, Donald Yacktman, Mario Gabelli and Jean-Marie Eveillard.

View Apache Corp.’s 10-Year Financials.

To view more of his stocks, visit Brian Rogers’ Portfolio Also view his undervalued stocks, his high-yield companies and his top growth stocks.

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About the author:

Dianne Tordillo
Dianne Tordillo is staff writer for GuruFocus.com. She reports on a variety of financial news, primarily dealing with investor portfolios and stock trades. Her articles also highlight insider trades, as well as the many useful features of GuruFocus.

Visit Dianne Tordillo's Website

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