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Kyle Ferguson
Kyle Ferguson
Articles (522)  | Author's Website |

Ron Baron Exits Towers Watson

Company is trading above intrinsic value and has been issuing new debt over the previous 9 years

May 23, 2016 | About:

Guru Ron Baron (Trades, Portfolio) sold his 762,284-share stake in Towers Watson & Co. (NASDAQ:TW) in the first quarter.

In July 2015, Willis Group Holdings PLC and Towers Watson announced plans to form a $17 billion global professional services firm by merging the two companies. In early January, the company announced that the merger was successful and was conducting business as Willis Towers Watson, a leading global advisory, broking and solutions company.

Towers Watson is a professional services company that helps organizations improve their performances through effective people, managing risk and financial management. The company also offers solutions to optimize employee benefits, talent management and health care exchanges for both retired and active employees. Towers Watson currently employs 39,000 people in more than 120 countries worldwide.

Towers Watson has a market cap of $17.22 billion, a P/E ratio of 30.31, an enterprise value of $20.33 billion, a P/B ratio of 1.53 and a dividend yield of 2.38.

Towers Watson is also traded in Germany.

02May2017163849.png

Baron may have decided to sell out his stake in Towers Watson for the following reasons.

  • Currently, Towers Watson is trading at $123 per share, which is above its intrinsic value. According to GuruFocus the company is worth $94.48 per share based on discounted earnings.
  • The company is trading above the Peter Lynch fair value of $107.16.
  • The company has increased its debt per share by an average of 22% annually over the previous nine years from $0.71 million to $5.09 million as of September 2015.
  • Towers Watson has been increasing its total debt at an exponential rate over the previous nine years. In June 2006 the company had $30 million of debt. As of September 2015, the company reported $329 million of debt, an average annual increase of 27% over the previous nine years.

It is noteworthy for investors that gurus Mario Gabelli (Trades, Portfolio), Chuck Royce (Trades, Portfolio), Pioneer Investments (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), John Rogers (Trades, Portfolio) and Jeff Ubben (Trades, Portfolio) sold out their positions in Towers Watson in the first quarter.

Below is a Peter Lynch Chart for Towers Watson.

02May2017163849.png

Baron is CEO, CIO, portfolio manager and trustee at Baron Funds. Prior to founding Baron Funds in 1982, Baron attended Bucknell University where he graduated in 1965 with a B.A. in chemistry. Baron Funds currently owns 296 stocks with a total value of $18.90 billion.

Cheers to your investment success.

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About the author:

Kyle Ferguson
Kyle Ferguson is an investor, author of The Christian Bubble, and he is a world-renowned human and animal rights activist, and the co-founder of The Light Movement. He is outspoken, fearless, and relentless. Kyle lives in Montreal, Quebec, and he is dedicated to making the world a better place with love and light.

Visit Kyle Ferguson's Website


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