Two Stocks You Should Buy From AGF Portfolio, One to Avoid

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

AGF Management Limited, a Canadian investment management firm, manages assets for institutional investors including foundations, endowments, pension plans, and private clients. As of Dec. 31, 2012, the firm had $8.23 billion in assets under management and served more than one million investors. AGF disclosed its 13 F filings for the fourth quarter ending December 2012, wherein it revealed that the company has increased its position in Procter & Gamble and Cirrus Logic, as both companies showed a tremendous performance in their recent earnings report.  Meanwhile it has decreased its position in Tiffany & Co, which posted disappointing sales figures even in the holiday season. Let’s have a look at the current position of these stocks and the number of shares held by AGF:

<table> <tbody> <tr> <td> <p><strong>Company</strong></p> </td> <td> <p><strong>No. of Shares</strong></p> </td> <td> <p><strong>% age of portfolio</strong></p> </td> </tr> <tr> <td> <p><strong>Procter & Gamble Co.</strong> </p> </td> <td> <p>300600</p> </td> <td> <p>0.25%</p> </td> </tr> <tr> <td> <p><strong>Cirrus Logic Inc. </strong></p> </td> <td> <p>449100</p> </td> <td> <p>0.16%</p> </td> </tr> <tr> <td> <p><strong>Tiffany & Co. </strong></p> </td> <td> <p>112300</p> </td> <td> <p>0.08%</p> </td> </tr> </tbody> </table>

Procter & Gamble (NYSE: PG): The company came out with strong second fiscal quarter earnings and posted an EPS of $1.22, beating the consensus estimate of ~$1.11. The company’s net income jumped to $4.06 billion, compared to $1.69 billion last year, and revenue rose by ~2% to ~$22.18 billion. The organic sales were in line as per expectations, with growth of ~3% (2% volume, 2% price, -1% mix). This robust growth was driven by its cost cutting initiatives and with the gain on the purchase of the balance of P&G's Baby Care and Feminine Care joint venture in Iberia. The company in recent years lost its market share in half of its product categories to its competitors because of its increased prices and its major focus on expanding overseas. Realizing the loss, the company lowered its prices on laundry detergents, toothpaste, and other products in the United States. Furthermore, several cost cutting measures were also adopted by the company that aim at saving $10 billion by 2016. The strategy has worked out well so far and the company finally saw a boost in its earnings. The improving trend and an impressive quarter have raised investor’s expectations for fiscal 2013.

Cirrus Logic (NASDAQ: CRUS): Cirrus reported good third quarter 2013 earnings, with revenue up by ~153% on y/y basis and came to ~$310 million, which was significantly above the consensus estimate of ~$284.96 million. On the other hand, energy sales declined 36%. This increased revenue was mainly driven by the robust revenue of portable audio, which was up ~69%. Apple is Cirrus’s largest customer, taking parts from the company to manufacture its audio products, and accounting for 91% of Cirrus sales. Since Cirrus is too dependent on Apple, Cirrus is now looking to diversify its customer base and is developing a catalogue business that is meant to serve the broader mobile customers. And for this, Cirrus is looking for new customers and opportunities in developing markets. This diversification has already started paying off as its catalogue devices are now being shipped to various mobile phone manufacturers. I anticipate that the company will continue with this stellar performance in the fourth quarter too, and will generate revenue between ~$200 million to ~$220.0 million.

Tiffany & Co. (NYSE: TIF): Tiffany posted disappointing holiday sales figures for November and December. The total sales increased ~4%, but comps remained flat. This decline was majorly due to the soft markets of America, which reported same store sales dropping by 2%, whereas Europe comps stayed flat. The only region that posted impressive comps was Asia Pacific, where comps rose 7%, mainly driven by firming hard luxury sales and the macro trends in China and Hong Kong, while Japan rose by 1%. The company is facing problems from its silver category, which is Tiffany's high margin business and accounts for ~25% of its sales. The lower priced silver category is noticing a weakness as it lacks newness, and the current fashion trends are posing a threat to the company's more classic aesthetics. Tiffany seriously needs to think about bringing high quality and brand appropriate products at lower prices to capture the customers who can’t afford its current high priced offerings. The company is continuously losing its business to Zale and Signet in jewelry priced under ~$550. Looking at the low earnings and economic uncertainties, the company has lowered its expectations and it anticipates its earnings will increase by only ~6% to 9%, as compared to the ~17% estimated earlier by consensus. Furthermore, it has also lowered its EPS estimate to ~$3.45 from ~$3.75 for 2013.

To conclude, I remain bullish on P&G and Cirrus. P&G's sales figures are moving up and its operations are strengthening. The ~$10 billion in savings will allow the company to make investments in the emerging markets, reduce prices, and innovate. Cirrus’ business is on track and has opportunities to perform well with its new as well as existing customers. On the other hand, Tiffany’s sales decline is putting a dent in the confidence for investment as its silver category remains weak, so I remain neutral on the company until it revamps itself.

ShwetaDubey has no position in any stocks mentioned. The Motley Fool recommends Procter & Gamble. The Motley Fool owns shares of Cirrus Logic. 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!

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