Long-Term Investment Ideas from Billionaire Julian Robertson's Portfolio
Meena is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Julian Robertson manages the famous Tiger Management, which boasted impressive 31.7 percent annual returns between 1980 and 1998. His “Tiger cubs” include Philippe Laffont and Stephen Mandel, among many others. This article takes a look at Tiger Management's portfolio from the passive, long-term value investor's perspective. Low or average P/Es, market caps of over $20 billion, and long-term dividend or share buy-back programs are positives when it comes to assembling a passive portfolio. Here are some of the best long-term picks from Robertson's fund (view the fund's entire portfolio here).
Mastercard and Visa
Mastercard (NYSE: MA) has a forward P/E of 17, comparable to its competitor Visa (NYSE: V). Robertson holds both, and both are promising long-term plays. Mastercard Inc has consistently paid a very modest dividend since its IPO in 2006, and the company bought back 1.6 million shares in the second quarter 2012 for about $670 million. Mastercard is now repurchasing shares under its new $1.5 billion buy-back authorization. Visa Inc maintains a slightly higher dividend yield at 0.7 percent.
Broadly, both company's businesses are exposed to consumer spending slowdowns in Europe and the United States, but both are focusing on the so-called “war on cash” as opposed to a war with each other. Since about 85 percent of the world's consumer transactions are paid for in cash or check, both Visa and Mastercard see lots of market space available for development regardless of economic climate. Mastercard and Visa have betas of 0.9 and 0.8, respectively, which are below average for financial services stocks.
Qualcomm (NASDAQ: QCOM) has consistently paid a dividend since 2003, which presently yields 1.6 percent. In 2011, the company returned $1.5 billion to shareholders in the form of dividends and share repurchases, and the company has consistently churned out returns for its shareholders since the 1999-2001 internet stock bubble collapse. As we detailed in another article, Qualcomm has a significant number of 3G and 4G/LTE patents. According to a recent research finding, Qualcomm holds 21 percent of the necessary 4G patents, second only to LG Electronics Inc. (KRX:066570), which holds 23 percent. This is a reassuring finding considering that most of the world is still upgrading to 3G. Qualcomm's long-term profitability is reinforced by its consistent ethic of maintaining a minimal debt structure (its debt/capital is less than 4 percent). We also like Qualcomm's involvement in multiple operating systems and both major mobile solutions—tablet and phone. Long-term, Qualcomm stands to benefit from whatever the competitive outcome is among its many OEMs.
Barrick Gold Corporation (NYSE: ABX) is a gold mining and sales company with operations in North America, South America, and the Australian Pacific. Gold is a decent hedge against currency inflation and a good part of a balanced portfolio; additionally, the company's low beta of 0.4 indicates the company's relatively low covariance with the broader market. As of the end of 2011, the company had 140 million ounces of proven or probable gold reserves and 12.7 billion pounds of proven copper reserves. The company had lack-luster second quarter earnings performance, falling short of consensus analyst EPS estimates by 17 percent—a disappointment broadly shared with the rest of the gold mining sector. The resulting price depression makes it a good time to initiate a long-term position; shares are trading at 8.1 times forward earnings estimates, which is below the materials sector's average forward P/E of 12.
This article is written by Brian Tracz and edited by Meena Krishnamsetty. They don't own shares in any of the stocks mentioned in this article. The Motley Fool owns shares of MasterCard and Qualcomm. Motley Fool newsletter services recommend Visa. 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.If you have questions about this post or the Fool’s blog network, click here for information.