Billionaire Paul Tudor Jones' Latest Additions
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Billionaire Paul Tudor Jones (PTJ) has been all over the news after telling an audience of University of Virginia students and others that it's difficult for mothers to be successful traders given that their connection to a child is a focus "killer." PTJ has been one of the most successful traders over the past few decades, with a net worth of some $3.3 billion. Let's check out PTJ's latest moves during the first quarter (check out Tudor's top five).
Drugs and dividend bets
One of Tudor's biggest additions was Pfizer (NYSE: PFE), which now makes up 3.9% of the hedge fund's portfolio and is its second-largest stock holding. Pfizer is a major drug maker paying a 3.4% dividend yield. Pfizer managed to miss last quarter EPS estimates as dug-patent expirations hurt revenue. Pfizer also revised its 2013 outlook, cutting EPS guidance from a range of $2.20 to $2.30 down to $2.14 to $2.24.
Part of what Pfizer hopes will drive long-term growth is cost-cutting initiatives and a focus on higher-growth areas. These include the areas of oncology and entry into the Asian market and operations in share. Back to the cost cutting, the drug company managed to cut research and development nicely, with R&D expenses down to $7.3 billion in 2012. Those costs are expected to decline to a range of $6.5 billion to $7 billion in 2013.
The positive for shareholders is that the company plans on upping its dividend payout ratio to 40% by the end of 2013, from the current 33%. Billionaire Ken Fisher also has Pfizer as one of his top picks (check out Fisher's cheap stock picks).
Another big drug name that Tudor was buying up includes Merck, which comes after a 2,600% increase in shares owned. Merck is another major drug maker paying a 3.5% dividend yield. Merck recently lowered its EPS guidance due to a possibly greater than expected generic erosion in its drug Singulair. Yet, the stock is still up more than 15% year-to-date, as the market believes Merck's robust pipeline will support the stock over the interim. These include net treatments for insomnia, diabetes, cancer, and hepatitis C.
Another new addition for Tudor was Agilent Technologies (NYSE: A), now the fund's sixth-largest holding and 1.7% of its portfolio. Agilent is a measurement company that provides bio-analytical and electronic-measurement solutions to the life sciences industries.
One overhang for the stock is that about 10% of Agilent's revenue comes from the defense sector. Budge cuts could have a negative impact on the stock. As well, its government and academic segment could be negatively impact by sequestration. Agilent also lowered its fiscal 2013 sales and EPS guidance. This is partly due to the company's higher mix of instrument sales (one time CapEx purchases) to the recurring sales revenue mix.
Although there appears to be headwinds for the company, Agilent trades on the cheap side of the industry, at only 15.4 times earnings, compared to PerkinElmer at 47 times, Teradyne at 21.7 times and Thermo Fisher at 23.4 times. However, Agilent's mere 8% annualized expected EPS growth rate puts its PEG at a relatively high 2.
One of Tudor's biggest additions is WellPoint (NYSE: WLP), which was a 2,500% increase in shares owned during the first quarter and now makes up 1.6% of the portfolio. WellPoint posted EPS of $2.94 compared to $2.34 for the same period last year.
WellPoint has a strong cash position and cash flow, better than most managed- health insurers. As well, the company has become a top player in the Medicaid managed-healthcare market thanks to its Amerigroup acquisition. The addition of Amerigroup will increase the number of senior patients for the company, expected to help drive revenue 20% higher in 2013.
WellPoint also snatched up Medicare specialist CareMore Health, which will help the company expand its presence in the U.S. government program for the elderly. WellPoint's acquisition of 1-800-Contacts should help the company diversify its portfolio.
At the end of 1Q, there were 44 hedge funds long the stock. However, worth noting is that Alan Fournier's Pennant Capital dumped the largest stake, an estimated $194 million in stock (check out Pennant's portfolio).
Baby boom bet
Another notable addition to Tudor's portfolio is Brookdale Senior Living (NYSE: BKD). Brookdale managed to post 1Q EPS of $0.03 compared to the loss of $0.09 from the same quarter last year. What's more is that free cash flow from facility operations (FFFO) was up to $0.57, above the $0.48 from the same period last year.
One of the big advantages for the company is that it's the largest provider of senior living facilities in the U.S. This company should perform well thanks to the expected rise in baby boomers. Over the next 18 years, baby boomers will be turning 65 at a rate of about 8,000 a day, according to the AARP.
Analysts expect a 3.6% rise in revenue for 2013, and 3% growth in 2014. Although interim pressures may come from Medicare rate cuts, long-term results should be driven by acquisitions. Brookdale also trades below a couple major peers at only 1.2 times sales, compared to Assisted Living at about 1.3 times and Capital Senior Living at 2.1 times.
Although PTJ likes to focus on short-term trades, I believe that there are a number of his latest additions could easily be made into long-term investments. PTJ has a couple big bets on pharma companies, both paying solid dividends. I like both drug stocks. Agilent appears to have too many headwinds, and so I'd hold off on the stock for now. Meanwhile, I think WellPoint is a solid pick with its key acquisitions. As well, Brookdale is a worthwhile investment thanks to the increasing number of baby boomers.
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Marshall Hargrave has no position in any stocks mentioned. The Motley Fool recommends WellPoint. The Motley Fool owns shares of WellPoint. 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!