Analyzing Acadian Asset Management's Top Buys
Shweta is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Acadian Asset Management LLC is an investment advisory and hedge fund firm based in Boston. The firm manages over $12 billion in equities and invests across all market caps, and uses a bottom up approach. The following is a list of its top three buys from the last quarter.
Each of the above three stocks have good long term growth plans, which are bound to reflect in a positive way in their revenue figures. These prospects make them favorable buys. Here’s a look at each of these stocks in detail.
The TJX Companies
TJX is currently trading at $41.56, up ~30% year to date, which is more than its peer group; Kohl's is up ~14% and Target is up ~24%. TJX’s core growth lies in its off-price approach, which has been proved by its sales growth. For the quarter ended October 2012 the company reported same-store sales up 7%, and for the year that metric is up by 11%.
Under its long term growth plans, TJX is utilizing its unparalleled scale, size, and off-price capabilities to monetize still unreached markets. It is increasing its store base across the US and Europe, bringing the total store count to 4,455. It plans to open 795 new stores in US, 508 in Europe, and 106 in Canada. Also, TJX is planning to expand its European market with the help of its Buying Offices (it currently operates a buying office in Italy).
Additionally, TJX’s strategy of buying inventory through opportunistic purchases will continue to give it an upper hand. It takes the advantage of order cancellations and special productions under discounts, which makes it a preferred choice for vendors. This advantage helps in increasing store traffic, as consumers can easily avail key brands under one head with heavy discounts. TJX is all set with gift initiatives and marketing campaigns for the coming holiday season. Its underutilized young demographic force (between age group 18-34) gives it enough room to target for a traffic increase in its stores.
I can see TJX as an impressive opportunity to buy, with its proven consistent growth in EBIT of 14.5% over the last ten years and its strong balance sheet, as well as a cash surplus of $1.6 billion by 2Q 2012.
Although Tesoro has missed earnings estimates in 3Q 2012 (reported EPS of $2.05 vs. consensus estimate of $2.33), I think the company is well placed to grow in the future, based on its earnings strength. Its Crude Oil gathering was up by $4.8 million quarter over quarter, mainly driven by Tesoro’s Mandan Refinery expansion by 10kb/d, and by moving Bakken crude oil to alternative destinations. This will have an incremental impact on its margins in the future.
Additionally, the main area of focus for the company is the Carson Deal, which is expected to close by mid-2013 after necessary regulatory approvals. The deal is worth $2.5 billion & would make Tesoro the largest US Pacific Basin refiner, giving it control of ~25% of the total refining capacity in the state of California. The deal is expected to boost EPS by ~24% in each of its first & second years of operations, with significant operational synergies.
Another point on which I am placing my confidence is the Anacortes rail project. After finishing the project before its scheduled time, Tesoro started receiving Bakken Crude during Q2. The total capacity for the project is 50 mbpd, and is expected to deliver ~40 mbpd in 4Q 2012. I expect this would prove beneficial for the company's Pacific Northwest refining margins.
Two other projects that would result in increased earnings are -
- Salt Lake City conversion project (to run over 20 mbpd of price advantaged waxy crude oil), with increased capacity of 4 mbpd, anticipated to come on-line in 2013.
- Installation of the new vacuum distillation unit at the Wilmington, which is expected to start its operations in Nov 2012.
With an expected lower 5 year PEG ratio of 0.43 against the industry average of 0.67 makes the stock a good buying option at this time. Also, the recent announcement of a 25% increase in quarterly dividends (1.6% yield to be paid on Dec. 14) underlines Tesoro's focus on enhancing the return for its shareholders. I see this stock as investor friendly & recommend it as a buy.
Groupo Telvisa saw its 3Q 2012 profit jump by 41.5% year over year, mainly driven by growth and success of Sky. Low-cost offerings combined with the sale of premium services (high definition and DVRs) are the main reasons for Sky's ever-increasing customers. I see Sky as a cash cow for the company, as it has seen its highest growth since the launch. In the future Televisa will be focusing a lot on the profitability of Sky.
Televisa is also aiming for the mobile market with Lusacell (50% owned by Televisa). Lusacell experienced year over year increases in its customer base by ~35% in 3Q 2012, reaching 6.8 million. Mexican Telco industry is expected to generate ~$2.5 billion by 2015, with over 60% coming from Mobile services. This provides the company with an important opportunity to cash-in and will also help it meet its target of increasing its market share to ~15% from the current market share of ~6%. However, recent news of Televisa’s $800 million investment in Lusacell over 3 years has raised a few concerns on capex for the company. But Televisa will only be investing further in this deal if Lusacell is able to prove its efficiency and the regulatory environment continues to be helpful. So I won’t lay much stress on these concerns.
Additionally, the company is also planning to venture into new markets to expand its streams of revenue. Televisa is launching a U.S.-based production company, Televisa USA, to create English-language content for American television. The first project is scheduled to air in 2013. Also, the Televisa & Sony co-production deal signed in early 2012 is on the right track with their first project in the Arab region.
Another point to look forward to is the expected settlement of the dispute with the Carso group. This could add ~3% to total EBITDA. Plus, Televisa's deal with Dish Mexico on channel programming will result in an additional ~2-4% to EBITDA. Looking at the above mentioned factors, I would rate this stock as buy.
ShwetaDubey has no positions in the stocks mentioned above. The Motley Fool has no positions in the stocks mentioned above. 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.