Analyzing Billionaire Ken Fisher’s Top New Buys

Shweta is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Fisher Investments is a California based hedge fund firm founded by billionaire Ken Fisher. The firm manages ~$35 billion in equities primarily following a value oriented approach. The firm usually follows a top down approach for identifying investment targets. The following is a list of its top three buys from the last quarter:

<table> <tbody> <tr> <td> <p>Company Name</p> </td> <td> <p>Shares Bought Last Quarter</p> </td> </tr> <tr> <td> <p><strong>Petroleo Brasileiro  </strong><span class="ticker" data-id="204923">(NYSE: <a href="http://caps.fool.com/Ticker/PBR.aspx">PBR</a>)</span></p> </td> <td> <p>17,914,836</p> </td> </tr> <tr> <td> <p><strong>Comcast  </strong><span class="ticker" data-id="203139">(NASDAQ: <a href="http://caps.fool.com/Ticker/CMCSA.aspx">CMCSA</a>)</span></p> </td> <td> <p>11,737,561</p> </td> </tr> <tr> <td> <p><strong>Vodafone Group  </strong><span class="ticker" data-id="206015">(NASDAQ: <a href="http://caps.fool.com/Ticker/VOD.aspx">VOD</a>)</span></p> </td> <td> <p>9,805,503</p> </td> </tr> </tbody> </table>

Here’s a look at these stocks in detail.

Petrobras

Petrobas is trading at a forward PE of just 7x. Given its operational improvements and recent deals (Brazil HRT/Saipem), which are expected to be the productivity boosters, I believe the company is undervalued. The company also got its approval to acquire a 30% holding in Anadarko in September, which is going to double its production level by 2020.

The on-going PROCOP program (2012-16), on the other side, aims at cost reduction and addresses profitability issues. The program is expected to tackle a manageable cost base of R$63 B in 2012 and will further lead to a cost reduction of ~12% of estimated manageable cost (~R$75 B) in 2013.

With many more ultra-deepwater rigs coming (14 being delivered this year and another one in 2013), a strong pipeline of future contracts, a potential asset sale of ~$4-6bn in GoM and improving results from its Gas & Power Business unit, I recommend a buy on it.

Comcast Corporation

Comcast’s NBC was ranked number one in primetime last quarter, driven by a successful Olympics (31.1M viewers/night) and Sunday Night football. In conjunction, its current shows like “Voice” and “Revolution” help its revenue growth trajectory. 

On other side, its films and theme park division have been bidding exceptionally well. Movies like Bourne Legacy and Ted are forecasted to generate an OCF of ~$60M. Similarly, its Theme parks are expected to post an operating income of ~$609M (thanks to new charms like Harry Potter in Orlando and Transformers!) 

In addition to organic growth, its acquisition of Microsoft shares in a joint venture will give it full control over digital business. The company’s continued investment in video/high speed data and phone, has led to launch of various innovative services  (like Xcalibur, Xfinity, Streampix). It is rolling out its Cloud based used interface in 2012 as an effort to reduce the cost of set top boxes and improve quality of services for its customer base.

Comcast may go for share buyback of around ~$3B with proceeds coming from Spectrum Company sale (US $2.3bn) and A&E (US$3.025bn). With almost zero exposure to volatile European market and its attractive valuation of 6.3x EV/EBITDA, I would recommend buying this stock

Vodafone Group Public Limited Company

Verizon Wireless (45% owned by Vodafone) reported strong Q3’12 results. Verizon is expected to have a solid growth rate, with continuing investments in 4G technology (covering 80% of the US population). This will have a positive impact on Vodafone, as Verizon wireless accounts for >40% of operating profit for Vodafone. Vodafone should give better dividends, with continuing discretionary dividends generating from Verizon.

Vodafone’s focus on network infrastructure will help it maintain high pricing contracts with customers in Europe (it promises customers to provide more services to maintain its premium pricing contract). Also, it is gradually increasing its market share in enterprise segment. The acquisition of CWW will expand its reach in fixed line and hosting products for enterprises. The current strong focus of EU on curbing carbon emission will also give leverage to its smart meter and telemetry products.

With improved margin structure resulting from operational efficiencies/mobile consolidations efforts in markets like UK, India and Turkey, we could expect better performance from world’s 2nd largest telecom company. I recommend buying this stock.

References: Fund description was sourced from Thomson Reuters.


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 Petroleo Brasileiro S.A. (ADR), Vodafone Group Plc (ADR), and Vodafone Group Plc (ADR). 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.

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