Big Buys of Veritas Asset Management
Aubrey is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Veritas Asset Management (UK) Ltd. is an independent asset management firm wholly owned by its employees. Its investment philosophy focuses on growing and protecting the real value of its clients’ assets. The firm manages funds and portfolios through long-only or long-short strategies with an objective to deliver real returns for its clients in the long term. It is also known for its strong risk management controls. After its merger with Real Return Group in 2004, Veritas has made remarkable progress commercially. Among the well-known products of Veritas are the Veritas Global Equity Income and Veritas Global Focus. Both funds have been outperforming the MSCI World Index for many years already and have been awarded the Morningstar European Fund Manager of the Year for Global Equity in 2012.
The fourth quarter 13F filing of Veritas shows it had $3.131 billion assets under management. Its portfolio was composed of only 22 stocks. It did not initiate a new position, but rather increased its stake in 12. Among the big buys of Veritas to add to its existing holdings were Microsoft (NASDAQ: MSFT), Citigroup (NYSE: C), BP (NYSE: BP), Unitedhealth Group (NYSE: UNH), and Google (NASDAQ: GOOG). Let’s see how these stocks are performing.
Sources: Finviz.com and whalewisdom.com; prices as of Jan. 31, 2013
Veritas increased its stake in Microsoft by 60 percent in the fourth quarter, bringing the shares of Microsoft to 14.01% of its portfolio. It is currently the firm’s top holding. Veritas had concretely exhibited the discipline of buying low when the company’s stock price went into a dive during the end of the year. The share price has improved ever since; a brilliant move so far for Veritas.
Microsoft’s growth prospects are encouraging. The EPS growth estimate for the next year is 10.88%, a significant recovery from the contraction in its EPS this year. The company remains a highly attractive addition to every portfolio with a resurrected profit margin of 21.20%, a sound financial state, and healthy pricing (as shown by a P/E ratio of 15.30 and a forward P/E of 8.81). These add to the fact that it is one of the stocks highly favored for its impressive dividend payment record. The annualized payment has been increasing consistently by an average of about 14% within the last 7 seven years.
Veritas also increased its stake in Citigroup by 14 percent during the last quarter of 2012. The firm’s fourth-largest holding comprised 8.97% of its total portfolio. The fund manager initiated its position in Citigroup in the fourth quarter of 2011 and has been increasing its shares ever since.
Although the company experienced negative growth this year (-30.60%), the growth estimate for next year is 12.83%. The company faces challenges with its declining revenues. Nonetheless, it remains strong in terms of profitability. Also, while its operations are still largely financed by debt, the ratio has been declining. As of Jan. 30, 2013, the debt-equity ratio is 2.66, lower than last year’s first quarter-end ratio at 3.226. Citigroup currently has a healthy P/E ratio of 16.85 and a PEG of 1.45. Meanwhile, the dividend amount, which used to be as high as $0.54, has now stabilized at $0.01 per share.
Veritas purchased an additional 25% of BP shares; the holding represented 4.32% of the fund manager’s total portfolio. The firm initiated its stake in the second quarter of the previous year and has since been buying additional shares. BP has shown a remarkable improvement in terms of its EPS. In fact, the third quarter report has surpassed consensus by a wide margin of 25%. The earnings forecast for the company is as high as 13.93% in 2015.
Meanwhile, BP remains undervalued with its estimated P/E ratio at 8.15 and PEG of 1.71. The company remains financially sound with its current debt ratio of 0.42. It has also made remarkable improvements in its dividend payment. It is recalled that the amount had drastically declined in 2011 from a peak of $0.84 per share in 2010. The latest dividend paid by BP was $0.54, which is nearing its 2006 levels. With such a performance and the recent liberating decision coming from the US Department of Justice over the oil spill cases in the Gulf of Mexico, BP is becoming a good-looking addition to an investor’s portfolio.
Veritas increased its shares in Unitedhealth Group by 9%; it initiated this position in the fourth quarter of 2011. UNH has encouraging growth prospects. Estimates show that EPS growth this year is at 11.68% and will likely to be sustained in the next 5 years. UnitedHealth, a company that offers diversified health services, had surpassed consensus for its quarterly earnings three times in 2012. This is attributed to its robust sales performance. In fact, the quarterly revenue is up 11% year-on-year. The P/E ratio of 10.46 and PEG of 0.90 make UNH a healthy addition to an investor’s portfolio.
UNH is also a top dividend stock. It exhibited an outstanding increase in payment from a mere $0.03 in the first quarter of 2010 to $0.125 in the subsequent quarter. In the past 2 years, the annualized dividend has been rising at an average rate of 34%. It offers an undoubtedly attractive opportunity for income-seeking investors.
Veritas purchased 39,100 shares of Google in the fourth quarter; the holding represented 10.44% of the firm’s portfolio. It initiated the stake in the fourth quarter of 2011, and has since been consistently increasing its shares in the company. Google continues to amass revenues; the quarterly amount has grown by 36.23% year-over-year based on a Finviz.com compilation. The EPS growth estimate for next year is 17.51% and this double-digit growth is expected for the next 5 years.
The giant tech company operates at a net margin of 21.50%. Its healthy P/E ratio of 23.28 and PEG of 1.58 show encouraging growth prospects for Google. Meanwhile, Google’s futuristic Google Glass is currently on the table of the Federal Communications Commission (FCC) for review. The Internet-connected headset has Wi-Fi as well as Bluetooth radios.
Indeed, Veritas shows in its recent moves its exemplary management strategies. I believe each of these buys provides great opportunities for growth that every investor has to consider.
aubrey1102 has no position in any stocks mentioned. The Motley Fool recommends Google and UnitedHealth Group. The Motley Fool owns shares of Citigroup Inc , Google, and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!