, who helps oversee about half a trillion dollars at T. Rowe
Price and is portfolio manager of T. Rowe Price Equity Income
) since its inception in 1985, bought five new stocks in the
second quarter: Dell Inc. (
), Procter & Gamble Co. (
), Hess Corp. (
) and Kellogg Company (
Rogers' fund has delivered a 10.57% return since inception, and
short-term performance has been good, too. He has a year-to-date
return of 8.72%, with the three months ending June 30 declining
slightly for a negative 2.73% return.
In his first-quarter update, Rogers said he was positive about
the outlook for U.S. stocks in the foreseeable future. Some
encouraging telltale signs were reasonable P/E multiples despite
strong first-quarter gains with room for improvement as the
economy improved, healthy and potentially improving corporate
earnings and receding threat from the euro zone. His plan going
into the second quarter was to find attractive stocks in select
market sectors but not make drastic changes to his portfolios.
"As always, we focus on established companies exhibiting
attractive stock valuations and reasonable dividend yields rather
than on a broad view of economic conditions," he said.
Dell Inc. (
Dell became a public company in 1998 and by 2000 it became the
world's leading computer systems manufacturer. In the last 10
years the company has grown revenue at a rate of 10.8% annually,
and EBITDA at 8.1%. In fiscal 2012, it had record-breaking
revenue and free cash flow, with its second-highest earnings. Its
gross margin set a record too, and its operating and net margins
increased for the third consecutive years.
As annual PC sales have been declining, DELL has adopted a plan
to promote continued long-term growth through becoming an
end-to-end provider of enterprise solutions and services. To
establish itself as a full-services solutions company, DELL will
create its own innovative solutions and make acquisitions, which
it has already begun to do: In the first quarter of fiscal 2013,
50% of its gross margin came from enterprise solutions and
services. In the last 12 months, it made eight acquisitions.
Dell announced on June 12 that it would begin paying a dividend
for the first time. The payout will be $0.32 per share annually,
or $0.08 quarterly.
Dell's P/E ratio, at 6.93, has rarely been lower.
Procter & Gamble Co. (
Procter & Gamble, the $83 billion global consumer products
company reportedly purchased by activist investor
in the second quarter, was Rogers' second-largest purchase. He
bought 1 million shares at an average price of about $64. The
stock has since risen about 2% to almost $65.
Procter & Gamble has increased its revenue at an annual rate
of 7.3% over the last 10 years, and EBITDA at 9.6%. In the last
several years its revenue has fluctuated: It fell to $79 billion
in 2009, again to $78.9 billion in 2010, and increased to $82.6
billion in 2011. Each year since 2007 PG has generated free cash
flow over $10 billion.
Over the last five years, PG shares have moved just 3.5%, but it
pays a sizable 2.4% dividend yield. In a June CNBC interview,
said of PG, "I think Procter & Gamble is a great illustration
of the difference between being a short-term investor versus a
long-term investor. Most short-term investors would probably shy
away from it; long-term investors would probably look and say
this is a great bargain long term and a great buying
The massive company has just over $10 billion in cash on its
balance sheet, with approximately $42 billion in long-term
liabilities and debt, around the same level it has been since
said in an FTC filing that his $2 billion position in PG was his
largest initial investment in a company ever. The activist
investor likely has ideas to fix the weaknesses the company has
displayed recently. In July, it warned investors that
second-quarter and full-year results would miss estimates.
Hess Corp. (
Hess is a global energy company dealing in crude oil, natural
gas, petroleum products and electricity. Rogers bought 1.25
million shares at an average price of $49; the stock has since
Hess Corp. has similar growth rates to his other purchases: Its
revenue growth rate it 9.9% annually for the last 10 years, and
EBITDA growth rate is 7.2%. After dropping more than $10 billion
in 2009, Hess' revenue has been increasing for the last three
years. For 2011, it produced earnings of $1.7 billion, or $5.01
per share, due to lower crude oil and natural gas sales volumes,
lower refining results and higher crude oil prices.
In the last five years, Hess' stock has declined 32%. At one
point in 2008, it traded as high as the $120s, but has since
dropped to about $45.
Kellogg Company (
Rogers bought 1 million shares of Kellogg Company at an average
price of about $51. Kellogg is the world's leading producer of
cereal, and a top producer of other food brands. It is the only
food and beverage company in Rogers' top 10 holdings.
Kellogg has grown revenue at an average rate of 6.4% and EBITDA
at an average rate of 4.8% over the last 10 years. The company
has $1.7 billion in cash on its balance sheet, with approximately
$6 billion in long-term liabilities and debt. Free cash flow has
been positive for the last decade. The company is currently trade
at a P/E of 14.23, its lowest level since the recession in 2009.
Kellogg's stock decline has come on missed earnings estimates due
to weaknesses in Europe. The company's international sales in the
first quarter declined 7.1 percent, with Europe down 10.4% and
Latin America gaining 7.5%. Because of the weak results, the
company lowered its earnings guidance by approximately 2 percent
to a range between $3.18 and $3.30 per share.
On May 31, Kellogg bought Pringles for $2.7 billion, which nearly
tripled its international snack business. The move plays into
Kellogg's overarching goal of expanding its global snacks
businesses to the size of its global cereal business.
Rogers also bought Valero Energy (
), added to numerous other positions and sold others in the
second quarter. See his portfolio here.
Also check out the Undervalued Stocks, Top Growth Companies and
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