We took a look at the Tudor Group portfolio, run by Paul Tudor Jones. Like Jeremy Grantham, it seems the Tudor Group is a closet S&P 500 tracker, adding 328 mostly large cap stocks to the portfolio in the most recent reporting period, including 600,000 shares of SPDR S&P500 ETF Trust (SPY) (7.09% of the portfolio). Jones added shares of all of the stocks below during the most recent reporting period. Here’s our commentary on each.
Cisco (CSCO): Shares have been weak as of late, but a return to its core focus should permit CSCO shares to approach $30 by year's end. Citi recently forecast a return to IT growth rates to 1.5-2xs GDP growth. Cisco should be pleased as the world’s largest purveyor of data networking equipment. We estimate fair value north of $30 per share. Its forward P/E of 9.8 also suggests it is currently attractive for investors. With a coordinated effort to stabilize Japan and the world’s currently meek-voiced economic momentum, it is reassuring for the analysts at Citi as much as it is for those who decided to lever their portfolios to this trend through Cisco.
AT&T (T): AT&T made waves recently, after being a multi-year leader in adoption of Apple's (AAPL) iPhone technology. AT&T is looking to purchase the fourth largest cell phone provider in the states, T-Mobile. This provides valuable, complementary spectrum to AT&T's non-CDMA technology and an exit plan for Deutsche Telecom (DTEGY.PK). Shares trade at a P/E of 8.8, P/B of 1.5, and P/S of 1.4. The industry averages are 16.1, 2.0, and 1.4, respectively. From 2001 to 2007, T shares traded at a P/S of 2.9, 2.1, 2.1, 2.1, 1.9, 2.2 and 2.2 respectively. In 2010, EPS was $3.35, which was an increase of 58.02%, after decreasing by 1.85% in 2009. The company expects mid-single digit EPS growth or better in 2011. Q1 2011 results are revealed on April 21. The stock yields 5.6%.
Citi (C): The banking giant, with a market cap of $128.43B, seems to finally be pulling out of the financial crisis. Earnings were once again positive in 2010, and are expected to grow a good amount in the next few years. Citi is trading at a price/book ratio of only .79, despite the renewed earnings and solid 15.22% operating margin. The company recently reinstated a dividend of 1 cent per share, a mostly symbolic gesture to show that the company’s financial conditions are improving. Analysts expect the dividend to be raised to a more significant amount by 2012. One of the biggest American banks, Citi is well diversified globally, with operations around the world. With its extensive resources, it should be able to position itself for success down the road. Nonetheless, Citi will not be under $5 for long. The company has announced a reverse 1-10 stock split. While partly a psychological move, the reverse split will also allow institutional investors, many of whom cannot buy stocks that trade under $5, to buy Citi stock. This should enlarge the investor base and potentially drive up the share price. Guru investor Bill Ackman is also a shareholder.
Microsoft (MSFT) Trading at 24.80 with a forward P/E of 9.0, Microsoft defined what it was to be a new school blue-chip -- so much so that calling it "new school" today will get you odd looks. It has been trending lower for the past couple of months, but didn’t react sharply to news out of Japan. Currently analysts, including Oppenheimer, have price targets for the company as high as $36/share, giving it plenty of room for upward movement. Leadership remains strong and the stable of talent ready to lead is very substantial.
Apache Corporation (APA): Apache is one of the largest independent exploration and production companies in the world with plays throughout North America, and oil and gas projects in Egypt, Australia, Argentina and the U.K. President Obama called natural gas’ potential as a vehicle fuel “enormous”, and Apache has already undertaken steps to push natural gas fuel. Apache announced that it would provide a compressed natural-gas fuel station at Houston’s George Bush Intercontinental Airport to serve the airport parking shuttle fleet. This move is likely just the first of many as Apache tries to expand the role of CNG-powered vehicles.
Starwood Property Trust (STWD): Reflects the fact that the commercial and residential real estate market has turned a corner. 2010 Q1, Q2, and Q3 net incomes came in as positive. By the way, the current yield is a robust 5.25 percent. The company is focused primarily on originating, investing in, financing and managing commercial mortgage loans and other commercial real estate debt investments. It also invests in residential mortgage-backed securities and residential mortgage loans.
Noble Energy (NBL): Looking at historical figures, investors have priced in revenue growth in excess of 25% and EPS growth well above the highest estimates. Given the improving global economic environment and resultant higher demand for oil and gas, and Noble’s discovered reserves, we expect Noble to continue increase production and sales at its current pace, we expect revenues at $3.4 billion. Assuming a price to sales multiple of 5.5, we place a price target of $105.50. You’re looking at making 9% here. These shares do not provide aggressive capital appreciation at this point, but are a buy.
Noble Energy is a leading independent energy company engaged in worldwide oil and gas exploration and production. The company has core operations onshore in the U.S., primarily in the DJ Basin, in the deepwater Gulf of Mexico, offshore Eastern Mediterranean, and offshore West Africa. This company does have exposure in Saudi Arabia.
Peabody Energy (BTU): Peabody also operates primarily in the large, western mines of the Powder River Basin. The company holds some developed coal interests in Australia as well. Both China and India are likely to be huge coal importers in the near future, which was likely part of Peabody's plan in developing its Australian mines. Our fair value estimate for Peabody is $58.50.
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