While relatively young, John Burbank�� firm, Passport Capital, has been quite successful on the strength of its fundamentals-focused stock picking and more exotic plays based on global macro conditions. Since Burbank launched Passport in 2000, he has grown assets to $3.3 billion under management, delivered an annualized 23 percent return to investors, and, this month, become GuruFocus��newest Guru.
In his pre-hedge fund past, Burbank was a consultant to Roger Richter of JMG Triton Offshore Ltd. and director of research at ValueVest Management. His investing career began just before the late-��0s Asian crisis, where he learned valuable lessons that helped him avoid the dot-com debacle several years later. He earned a B.A. from Duke University and an MBA from Stanford Graduate School of Business.
Currently Burbank has both an equity portfolio and some intriguing irons in the fire elsewhere, but his 12-year history with Passport has been eventful as well.
In Passport�� first year of operation, it shunned the tech craze and shorted high-flying technology stocks. For the three years the S&P 500 reeled from the backlash of the overvalued stocks with returns in the negative numbers, Burbank�� flagship Global Strategy fund returned 36% in 2000, 7% in 2001 and 22.1% in 2002.
A few years later, Burbank made a very prescient call on the collapse of the U.S. housing market. He began shorting the overheated market in 2004, buying subprime mortgage-backed credit default swaps, exemplifying one of his standout quotes, ��he way to make high returns is to invest in things people don�� understand.��br>
By 2007, as systemic cracks were spreading in the U.S. housing market, the Global Strategy Fund posted a staggering 219.7% return compared to 5.5% for the S&P, marking its eighth straight year of positive returns.
In 2008, when most of the market was crashing, Passport�� returns when down with it, like most funds. They posted a 50.9 percent loss that year. Though 1! 3Fs from the period are not available, a Forbes article from April 2008 says that a quarter of the fund was invested in basic materials such as iron ore and gold miners, with other large positions in Indian financial exchange firm Financial Technologies, Asian education company Raffles Education, Yamana Gold (AUY) and Transocean (RIG).
By the end of 2008, Yamana Gold fell almost 50 percent, and Transocean plunged about 63 percent.
Now, Burbank is bullish on emerging markets, and one of his favorite ideas is investing in Saudi Arabia, which he has been doing for about three years, as foreigners were not allowed to invest there until August 2008. In February 2012, he had 15 percent of his fund allocated there, according to Bloomberg. High prices of oil, he says, are helping Saudi Markets, only 1 percent of which is held by foreigners.
The Saudi market was at that point trading at 11 times earnings with a 5 percent dividend yield, on an unlevered basis, and Saudis have about $600 billion in reserves and little corporate debt, making it a less risky investment, he said in a Bloomberg interview.
Burbank in his first-quarter letter to investors was pessimistic about the economy and foresees a recession in the U.S. in 2012 or early 2013. In response, he reduced portfolio illiquidity, increased shots and hedges, initiated an investment in mortgage-backed securities, added to his physical gold holdings and established a long position in Brent Crude.
Regarding equities, Burbank said 2012 is a great year for long and short equities. ��ur strategy is to be picking individual securities of companies that aren�� depending on economic growth, and obviously biotech and healthcare is one of those sectors,��he said on Bloomberg.
His largest new buys in the first quarter are: Penn Virginia Group Holdings LP (PVG), Wynn Resorts Ltd. (WYNN), Methanex Corp. (MEOH), Solutia Inc. (SOA) and Georgia Gulf (GGC). Of his top eight stocks, five are from the chemicals industry.
His! largest holdings are Cytec Industries Inc. (CYT), Vivus Inc. (VVUS), Marathon Petrol (MPC), Google Inc. Cl A (GOOG) and Liberty Media A (LINTA).
See John Burbank�� portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of John Burbank.
Top 10 Undervalued Stocks For 2014: Dollar Tree Inc.(DLTR)
Dollar Tree, Inc. operates discount variety stores in the United States and Canada. Its stores offer merchandise primarily at the fixed price of $1.00. The company operates its stores under the names of Dollar Tree, Deal$, Dollar Tree Deal$, Dollar Giant, and Dollar Bills. Its stores offer consumable merchandise, including candy and food, and health and beauty care, as well as household consumables, such as paper, plastics, household chemicals, in select stores, and frozen and refrigerated food; variety merchandise, which includes toys, durable housewares, gifts, party goods, greeting cards, softlines, and other items; and seasonal goods, such as Easter, Halloween, and Christmas merchandise. As of April 30, 2011, it operated 4,089 stores in 48 states and the District of Columbia, as well as 88 stores in Canada. The company was founded in 1986 and is based in Chesapeake, Virginia.
Advisors' Opinion: - [By Sam Collins]
Dollar Tree (NASDAQ:DLTR) is a leading operator of discount variety stores. The stock has hugged its 50-day moving average since mid-February. But a recent minor revision of earnings for this year by several analysts and the recent market sell-off have resulted in a fall from its high of the year at over $70 to under $66. However, Goldman Sachs (NYSE:GS) increased its price target to $73 from $69.
Technically DLTR is oversold, according to MACD. A break below its 50-day moving average could result in a pullback to $64, but positions could be taken at the current market price. The trading target for DLTR is $72.
Top 10 Undervalued Stocks For 2014: Caterpillar Inc.(CAT)
Caterpillar Inc. manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. It operates through three lines of businesses: Machinery, Engines, and Financial Products. The Machinery business offers construction, mining, and forestry machinery, including track and wheel tractors, track and wheel loaders, pipelayers, motor graders, wheel tractor-scrapers, track and wheel excavators, backhoe loaders, log skidders, log loaders, off-highway trucks, articulated trucks, paving products, skid steer loaders, underground mining equipment, tunnel boring equipment, and related parts. It also manufactures diesel-electric locomotives; and manufactures and services rail-related products and logistics services for other companies. The Engines business provides diesel, heavy fuel, and natural gas reciprocating engines for Caterpillar machinery, electric power generation systems, marine, petrol eum, construction, industrial, agricultural, and other applications. It offers industrial turbines and turbine-related services for oil and gas, and power generation applications. This business also remanufactures Caterpillar engines, machines, and engine components; and offers remanufacturing services for other companies. The Financial Products business provides retail and wholesale financing alternatives for Caterpillar machinery and engines, solar gas turbines, and other equipment and marine vessels, as well as offers loans and various forms of insurance to customers and dealers. It also offers financing for vehicles, power generation facilities, and marine vessels. The company markets its products directly, as well as through its distribution centers, dealers, and distributors. It was formerly known as Caterpillar Tractor Co. and changed its name to Caterpillar Inc. in 1986. Caterpillar Inc. was founded in 1925 and is headquartered in Peoria, Illinois.
Advisors' Opinion: - [By Jim Cramer,TheStreet]
Caterpillar (CAT) could be a monster in 2011, especially with the integration of Bucyrus International (BUCY), which I think will turn out to be a fantastic acquisition.
Current earnings-per-share estimates of about $6 are, I think, way too low. I see this stock going to $120 in the next year. Too gutsy? Ask yourself what happens if the United States comes back as a growth nation? Right now almost all of the growth is overseas.
Still a fantastic mineral play and a terrific call on world growth.
- [By Ben Levisohn]
For one day at least, this CAT is not a dog.
Caterpillar (CAT) has gained 2% to $86.22 today, its largest gain since in a month and the largest gain among the Dow components. The machinery manufacturer has dropped 11% during the past six months, however, as a slowdown in China and cost-cutting at mining companies have hit its shares.
Bloomberg
Susquehanna’s Ted Grace offers reasons for optimism, even as he lowers his 12-month price target to $97 from $104:
CAT remains Positive rated with 15% upside to our $97 price target and upside-downside of 1.2-to-1 (which, like most of our machinery names, is admittedly shy of the 2-to-1 or better ratio we prefer). Despite our 2014-15 EPS being ~6% below consensus, we view our updated estimates as closer to buyside expectations while noting that consensus appears to embed a low tax rate that explains over half of the variance. While there remains plenty of uncertainty on 2014/15, particularly in mining, we believe CAT shares currently discount reasonable top-line expectations while recent meetings with mgmt suggest potential for structural cost savings that could drive better than expected margins/ incrementals. While difficult to identify discernible catalysts, if CAT’s framework for flat-to-better RI revenue growth in 2014 proves correct (admittedly not assumed in our estimates), this would almost certainly debunk the core of the bear thesis and be meaningfully positive for shares.
Investors waiting for the stock to actually, you know, rise can take comfort in Caterpillar’s $2.40 dividend per share and its more than $3 per share in buybacks in 2013, Grace says.
Caterpillar’s 2% gain has trumped the Dow Jones Industrial Average’s 0.04% rise, and United Technology’s (UTX) 0.1% drop, while competitor Deere (DE) has gained 1.9% to $83.22.
- [By Roberto Pedone]
Caterpillar (CAT) is staging a textbook breakout in May. Shares of heavy equipment maker haven't exactly been kind to investors year-to-date; CAT has barely broken even during a time when the broad market has been in a historic rally. But a textbook breakout should change that.
CAT started forming an inverse head and shoulders pattern back in early April. The inverse head and shoulders is formed by two swing lows that bottom out around the same level (the shoulders), separated by a lower low called the head; the buy signal comes on the breakout above the pattern's "neckline" level, which was just below $86 for CAT. That puts this stock's upside target right around $92.
Even though CAT has nearly hit its upside target already (the post-breakout buying has been very quick), the longer-term implication for investors is a break of the downtrend that had been haranguing shares this year. Now, with that downtrend broken, CAT should have more room to move higher. I'd just expect some consolidation first.
Tupperware Brands Corporation operates as a direct seller of various products across a range of brands and categories through an independent sales force. The company engages in the manufacture and sale of kitchen and home products, and beauty and personal care products. It offers preparation, storage, and serving solutions for the kitchen and home, as well as kitchen cookware and tools, children?s educational toys, microwave products, and gifts under the Tupperware brand name primarily in Europe, Africa, the Middle East, the Asia Pacific, and North America. The company provides beauty and personal care products, which include skin care products, cosmetics, bath and body care, toiletries, fragrances, nutritional products, apparel, and related products principally in Mexico, South Africa, the Philippines, Australia, and Uruguay. It offers beauty and personal care products under the Armand Dupree, Avroy Shlain, BeautiControl, Fuller, NaturCare, Nutrimetics, Nuvo, and Swissgar de brand names. The company sells its Tupperware products directly to distributors, directors, managers, and dealers; and beauty products primarily through consultants and directors. As of December 26, 2009, the Tupperware distribution system had approximately 1,800 distributors, 61,300 managers, and 1.3 million dealers; and the sales force representing the Beauty businesses approximately 1.1 million. The company was formerly known as Tupperware Corporation and changed its name to Tupperware Brands Corporation in December 2005. The company was founded in 1996 and is headquartered in Orlando, Florida.
Advisors' Opinion: - [By Sam Collins]
Household name Tupperware Brands Corp. (NYSE:TUP) is a global direct seller of products with multiple brands through an independent sales force of 2.4 million people. Its product line focuses on kitchen storage and serving solutions, as well as personal-care products. Over 60% of sales in 2011 are expected to come from Europe and Asia, and the stock has appeal as an emerging markets story.
S&P estimates that 2011 earnings will increase to $4.54 versus $3.53 in 2010, and it increased its rating to a “five-star strong buy” with a recently revised 12-month target of $81, up from $73. The 2005 purchase of Sara Lee’s (NYSE:SLE) direct-sales business, which has a high growth rate, should be a long-term benefit. TUP’s annual dividend yield is 1.92%.
Technically TUP had a pullback following a new high at over $70 and is currently oversold. Buy TUP at the current market price with a trading target of $70, but longer term a much higher target will likely be attained.
Top 10 Undervalued Stocks For 2014: Schlumberger N.V.(SLB)
Schlumberger Limited, together with its subsidiaries, supplies technology, integrated project management, and information solutions to the oil and gas exploration and production industries worldwide. The company?s Oilfield Services segment provides exploration and production services; wireline technology that offers open-hole and cased-hole services; supplies engineering support, directional-drilling, measurement-while-drilling, and logging-while-drilling services; and testing services. This segment also offers well services; supplies well completion services and equipment; artificial lift; data and consulting services; geo services; and information solutions, such as consulting, software, information management system, and IT infrastructure services that support oil and gas industry. Its WesternGeco segment provides reservoir imaging, monitoring, and development services; and operates data processing centers and multiclient seismic library. This segment also offers variou s services include 3D and time-lapse (4D) seismic surveys to multi-component surveys for delineating prospects and reservoir management. The company?s M-I SWACO segment supplies drilling fluid systems to improve drilling performance; fluid systems and specialty tools to optimize wellbore productivity; production technology solutions to maximize production rates; and environmental solutions that manages waste volumes generated in drilling and production operations. Its Smith Oilfield segment designs, manufactures, and markets drill bits and borehole enlargement tools; and supplies drilling tools and services, tubular, completion services, and other related downhole solutions. The company?s Distribution segment markets pipes, valves, and fittings, as well as mill, safety, and other maintenance products. This segment also provides warehouse management, vendor integration, and inventory management services. Schlumberger Limited was founded in 1927 and is based in Houston, Texas.
Advisors' Opinion: - [By Kathy Kristof]
Headquarters: Houston
52-Week High: $79.38
52-Week Low: $56.86
Annual Sales: $39.5 bill.
Projected Earnings Growth: 18% annually over the next five years
Energy-services giant Schlumberger is the prototypical multinational. The company derives roughly 85% of its revenues from overseas, including developing markets in Africa, Brazil and Asia.
With particular expertise in deep-water drilling, Schlumberger is well-positioned to compete in a world where oil is harder to find, says Argus Research analyst Philip Weiss. Admittedly, oil exploration is a cyclical business, driven largely by crude prices. And weak prices for natural gas have hit the company’s stock, Weiss says. But the price of natural gas has little to do with Schlumberger’s profits, so Weiss just sees this as an opportunity to get the shares at a more reasonable price.
“When we write these white papers,” said panelist Ed Keon (left), managing director of Quantitative Management Associates, “we usually get four or five people to sign on, but not this time.” That’s because Keon’s fairly bullish view on the economy—“I expect next year we’ll see several quarters of 5% GDP growth”—wasn’t fully shared by fellow speakers, including Quincy Krosby and John Praveen. Keon’s argument for greater growth next year was based on his belief that the drags on the economy that we’ve seen this year, including tax increases and the sequester, would no longer be such an influence in 2014.
Speaking last, but certainly not least, Quincy Krosby (left), chief market strategist for Prudential Annuities, brought the discussion back down to earth, saying there was often a “disconnect between economic fundamentals and the markets.” She noted that the global search for yield continues, citing the recent oversubscription of Rwanda’s first dollar-denominated 10-year bond offering (single B-rated Rwanda issued its 8-times-oversubscribed debt at a yield of 6.875%).
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