3 Long Ideas From UBS Global Asset Management
Shweta is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
UBS Global Asset Management (Americas) Inc. is an asset management subsidiary of UBS AG. The firm manages ~$150 bn in assets out of which ~$70 bn is deployed in equities. The following is a list of firm’s top five buys rom the last quarter according to its latest 13F filing with SEC:
I scanned the firm’s top five buys from the last quarter for investment ideas and the following three stocks look to be compelling buys.
The Coca-Cola Company
Coca Cola’s shares have underperformed S&P500 this year so far. Despite of this underperformance, I believe the company is a good buy given its strong fundamentals. Over the long term, Coca Cola is set to benefit from its growth in emerging markets with new investments lined up. It has plans to invest $5 billion over the next 8 years in India and $300 million in Vietnam over the next 3 years.
Coming over to developed markets, the company has seen the benefits of the CCE acquisition in North America markets. Coca Cola also benefitted with its marketing campaign - the summer winning, in which it partnered with Spotify to offer teenagers access to millions of songs and exclusive Coca-Cola content. It generated 1.5 billion contacts and reached more than 90% of all teenagers in Germany. The company is laying out plans to replicate the same across various regions to drive consumer engagement.
In addition to various topline drivers, the company’s ongoing saving plan of $550 million-$650 million till 2015 is another catalyst for the stock. The company has already achieved $40 million-$50 million out of this cost saving plan. Other than this its share buyback program of 500mn shares, good dividend yield of 2.80%, and strong balance sheet makes this stock a good buy.
eBay stock price has risen ~56% in the last one year and is still seeing an strong upward momentum. Its PayPal unit continues to be the “crown jewel” growing at a rate of 30% Y/Y. eBay is capitalizing its global reach with its powerful platform enabling buyers and sellers connect irrespective of their location. With a hope to capture Chinese market, which is still in its early phase, eBay is partnering with Xiu.com. Chinese market operates with 193 million online shoppers and is expected to triple over next three years.
Additionally eBay will gain early market share with its early entry into the mobile commerce. Mobile commerce is expected to grow global merchandise volume to $10 billion (+100%) and PayPal mobile TPV to $10 billion (+150%) YOY
On the other side, recent partnership between MoneyGram and PayPal will give easy access of funds to under banked consumers. Given MGI’s reach (284k locations in 196 countries) and its location at major retailers (Wal-Mart, CVS, 7-Eleven etc.), it opens up a new opportunity for PayPal to drive in revenue with a new under banked user base of 60m. S
Taking into consideration, eBay long term growth prospects, FCF of $792mn and a forward P/E of 17.95x, I give this stock a buy rating.
Spirit’s is known for its cost effective fares and its innovative approach on its fees which gives it an upper hand against its peers. Focusing on core revenue growth, which is at 12% Y/Y, Spirit is adding five new Airbus A320neo to its technologically advanced and fuel efficient fleets. This will drive in incremental benefits and increasing market confidence to its business model.
Considering its core growth strategy of traffic stimulation, Spirit is well positioned among its peers. At major airports in the US (and selective airports of LatAm and Caribbean) Spirit’s low fares are attracting new passenger base without cutting the existing ones from its competitors (United and American). Low fare Spirit is generating significant profit margin of 13% creating a new market for its airline side by side. The company is looking for entering into high density market and has identified 300-400 potential city pairs attracting more passengers. Taking a long term stand on Spirit’s strategy, I think this success story will be difficult to replicate and we can anticipate the growth ~20% in topline to further continue. Hence, I rate this stock a buy.
ShwetaDubey has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. Motley Fool newsletter services recommend eBay and The Coca-Cola Company. 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.