What to Learn From Columbus Circle Investors’ Big Buys?
Aubrey is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Columbus Circle Investors is an equity investment manager based in Stamford, Connecticut. It implements a bottom-up philosophy in its investments, with special focus on companies with sound fundamentals that are able to exceed expectations. Based on annualized performance of its products within the ten years through the end of September 2012, its small cap, technology, and SMID products have outperformed the benchmarks by as high as 5.6 points (net of fees).
As of the end of 2012, CCI had a total of $12.291 billion worth of assets under management according to data compiled by whalewisdom.com. Its portfolio is largely composed of services, technology, and healthcare investments with an aggregate share of around 60 percent of the firm’s portfolio. The biggest buys of CCI are Procter & Gamble (NYSE: PG), Facebook (NASDAQ: FB), Hertz Global Holdings (NYSE: HTZ), Express Scripts (NASDAQ: ESRX), and Whirlpool Corp. (NYSE: WHR). Let’s check how these stocks fare.
Sources: finviz.com and whalewisdom.com; as of February 1, 2013
Procter & Gamble
CCI has gone with the flow by purchasing a new stake in Procter & Gamble worth about $138.8 million. The company has performed well in the past couple of quarters. It has a growing margin and its EPS is expected to grow by 8.44% annually in the next 5 years. P&G’s strong market share and growing overseas reach show that indeed there is more to expect from the company. In fact, about 60 percent of its revenues come from outside the US and the latest report shows that its sales in emerging markets and the BRIC area grew by 7 and 11 percent, respectively. As a result, P&G is enjoying robust stock performance. The price has gone very high, enough for analysts to notice that the stock is becoming quite expensive. However, given the trends in the global market, wherein P&G enjoys a substantial exposure, I believe that the company is poised to deliver more surprises in the future.
The growth expectation for Facebook is high; its EPS growth for next year is at 26.92 percent while the long-term estimate is even higher at 29.48 percent. This must have driven CCI to initiate a position composed of over 4.5 million shares, roughly amounting to $120 million according to the compilation of whalewisdom.com. Facebook is doing surprisingly well in terms of revenue growth. As the chart below shows, the quarterly revenues have grown year-on-year by an average rate of 50.88% within the last 7 quarters where growth data can be calculated. Though the trend is going down, the rate of increase is at a high magnitude.
Hertz Global Holdings
Hertz Global Holdings is vying to be number 1 in market share for car rental at U.S. airports with its successful buyout of Dollar Thrifty Automotive Group in November last year. This now allows Hertz to compete not only in the premium market where it has already established a name but also in the budget category. Indeed, the EPS growth for next year is placed at 35.34% and the long-term growth estimate is at 38.5%. The company has been surpassing consensus EPS estimates for the last several quarters already. And with a forward P/E of 10.38 and a PEG of 0.67, I can see why CCI initiated a stake of 6.607 million shares in the fourth quarter. The stock is attractive, indeed.
CCI has purchased an additional 88 percent of shares in Express Scripts. The provider of healthcare management services is in for robust growth in the coming years, with an EPS growth estimate placed at 17.67% in the next 5 years. In fact, the company has surpassed consensus EPS estimates in the previous couple of quarters. It also has a healthy valuation at a forward P/E of 13.05 and 12-month forward PEG ratio of 0.94. It has been freshly reiterated a “buy” with a score of B by TheStreet Ratings for its net income increase and robust revenue growth, which is shown in the chart below. Express Scripts, which now has 100 million members, is well-situated in the pharmacy benefit management business after it acquired Medco Health Solutions last year.
CCI increased its holding in Whirlpool 8-folds by buying an additional 880,258 shares in the fourth quarter. As in the other big buys of the fund manager, Whirlpool’s EPS is estimated to grow robustly, by 31.01%, next year. The company went beyond EPS consensus in the previous couple of quarters. Although it had missed revenue expectations recently, its strong earnings were attributed to an improved operating margin due to the success of cost-cutting strategies. Gross profit margin went up to 16.95% in the fourth quarter of 2012 from 14.50% in the same quarter of 2011. I believe Whirlpool is a strong company that has the capability to withstand a great deal of challenges. I say its huge exposure to emerging economies and its commitment for better performance in terms of energy efficiency and design will help it gain momentum.
Columbus Circle Investors had picked an excellent mix of big buys that provide good prospects for growth. I suggest investors to take a look and consider these companies for their own portfolios.
aubrey1102 has no position in any stocks mentioned. The Motley Fool recommends Express Scripts, Facebook, and Procter & Gamble. The Motley Fool owns shares of Express Scripts, Facebook, and Hertz Global Holdings. 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!