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Sheila Dang
Sheila Dang
Articles (264) 

James Barrow Buys Qualcomm, Deere & Co During Q1

May 12, 2015 | About:

During the first quarter, James Barrow (Trades, Portfolio) of Dallas-based investing firm Barrow, Hanley, Mewhinney & Strauss, added 182 new stocks to his portfolio.

Barrow boasts 53 years of experience in investing and is the lead portfolio manager of the Vanguard Windsor II and Selected Value Funds. In 1973, he joined the Republic National Bank of Dallas, where he would work with Tim Hanley and John Stauss, two other named partners of the firm.

As of the first quarter, the majority of the portfolio is held in the financial services sector at 22.7%, followed by 17.5% in healthcare stocks.

Qualcomm (NASDAQ:QCOM)

Barrow’s largest purchase was 18,445,837 shares of Qualcomm for an average price of $70.47 per share. The new holding has a 1.74% portfolio weighting.

The stock for the digital communication technology company declined 14% over the last year. Its current price is $69.05 with a P/E ratio of 16.4 and P/S ratio of 4.27. When comparing the price to the Peter Lynch earnings line, the stock appears to be nearing fair valuation.

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In the Q2 2015 earnings release, Qualcomm reported all-time high 3G/4G device shipments, but lowered guidance for the fiscal year.

“While we remain confident in the significant growth opportunities ahead, we are reducing our QCT outlook for fiscal 2015, primarily due to the increased impact of customer share shifts within the premium tier and a decline in our share at a large customer,” said CEO Steve Mollenkopf.

Net income grew steadily over the past five years by more than 25%, recording at $7,967 million in 2014. The graph below shows the net income trend over time.

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Qualcomm has continuously increased its dividend since 2003, and the current dividend yield is 2.42% — close to the 10-year high. The payout ratio is 40%.

Deere & Co (NYSE:DE)

Barrow also purchased 1,259,584 shares of Deere & Co, which traded for an average price of $88.73 during the quarter. The new stock accounts for 0.15% of the portfolio.

Deere provides products and services for agriculture and forestry, as well as construction, lawn care, and landscaping. The stock currently trades at $91.14 with a P/E ratio of 11.5 and P/S ratio of 0.94. Deere has consistent revenue and earnings growth shown by its business predictability rating of 3.5 out of 5 stars.

Over the past five years, the company’s EBIT per share has increased more than 25%, and reported at $4.63 in 2014.

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Deere’s dividend yield is 2.63%, which is close to the two-year high, while the payout ratio is 29%.

Con-way Inc (NYSE:CNW)

Barrow bought 2,190,806 shares of Con-way for an average price of $44.13 per share. The company provides transportation, logistics, and supply chain management services to manufacturing and industrial customers.

Con-way’s stock has declined 5% over the past year, and is currently priced at $42.16 with a P/E ratio of 17 and P/S ratio of 0.43.

In 2014, net income was $137 million, a significant increase from $99 million the previous year. The graph below shows Con-way’s net income trend over time.

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The dividend yield is 1.29%, and the payout ratio is 22%.

International Paper Co (NYSE:IP)

Barrow also initiated a new position in International Paper, buying 1,026,166 shares at an average price of $54.78 per share.

The company’s four operating segments are industrial packaging, printing papers, consumer packaging, and distribution. The stock rose 12% in the past year, and has a current P/E ratio of 23.3 and P/S ratio of 1.

EBIT per share over the past 10 years has risen about 10%, recording at $5.70 in 2014. This increased from $4.72 the year before.

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The operating margin has also been steadily increasing; in 2014, the margin was 10.43% — higher than the packaging and container industry average of 5.4%.

Norwegian Cruise Line Holdings (NASDAQ:NCLH)

Barrow’s fifth-largest purchase during the quarter was 486,549 shares of Norwegian Cruise Line Holdings, for an average price of $47.76 per share.

The stock price increased an impressive 64% over the past year and is now priced at $53.16. The P/E ratio is 32.7, while the P/S ratio is 3.61.

Norwegian Cruise Line has been improving their operating margin, increasing the margin by 7.86% over the past five years. In 2014, the margin was 16.09%.

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A warning sign for the company is the 0.13 current ratio. Norwegian Cruise Line’s current liabilities far outweigh the current assets, making it difficult to cover short-term obligations.

View James Barrow (Trades, Portfolio)’s latest stock picks here. Not a Premium Member of GuruFocus? Try it free for 7 days.

About the author:

Sheila Dang
Editorial assistant at GuruFocus

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