Viacom, Inc. (NASDAQ:VIAB) is another new pick in Andreas Halvorsen’s portfolio, valued at $139 million at the end of the third quarter. Viacom is a $26-billion media & entertainment conglomerate that operates famous TV networks, such as MTV, as well as film production companies, including Paramount Pictures and DreamWorks Pictures. Viacom’s stock is yielding 2.2% on a low payout ratio of 30%. Its competitors Time Warner Inc. (NYSE:TWX) and The Walt Disney Company (NYSE:DIS) are paying dividend yields of 2.2% and 1.2%, respectively. Over the past five years, Viacom’s EPS grew at an average annual rate of 14.2%. Analysts forecast that the company will sustain that rate of growth over the next five years. Since initiating a dividend in June 2010, Viacom has hiked its quarterly payout by 83%. The company’s revenues from advertising have been hurt recently by significant drops in viewership ratings for MTV and Nickelodeon. Higher programming expenses, economic weakness, fierce competition from video streaming companies, and saturated U.S. cable TV market will weigh on the company’s performance going forward. However, Viacom is trying to capture a growing share of online video streaming services, signing contracts with Hulu, Barnes & Noble, Inc. (NYSE:BKS) and Amazon.com, Inc. (NASDAQ:AMZN). Viacom’s stock has a forward P/E of 10.6, trading at a deep discount to its respective industry (with a forward P/E of 23.7). Competitors Time Warner and Walt Disney Company are pricier, boasting forward P/Es of 13.1 and 14.2, respectively. Viacom’s free cash flow yield is 7% and ROE is 29%. Berkshire Hathaway’s Warren Buffett owns more than $400 million in this stock.
Hartford Financial Services Group Inc (NYSE:HIG) is a new stock in Halvorsen’s hedge fund, worth nearly $48 million at the end of the previous quarter. The company is a $9-billion property and casualty insurer and one of the largest multi-line insurance and investment companies serving customers in the United States and Japan. It pays a dividend yield of 1.9% on a payout ratio of 44%. Its competitors Metlife Inc (NYSE:MET) and The Allstate Corporation (NYSE:ALL) are yielding 2.2% each. American International Group, Inc. (NYSE:AIG), another rival of The Hartford Financial, does not pay any regular dividends. Over the past five years, The Hartford Financial’s EPS contracted at an average annual rate of nearly 34%, and its dividends also collapsed. Analysts forecast the company’s EPS will grow at an average rate of nearly 12% per year for the next five years. The company is offering to pay cash to some clients to give up their retirement products. The effort aims to reduce risks tied to stock market declines and remove costs associated with maintaining expensive reserves for the guarantees. While the insurer will be hit by claims associated with the recent Hurricane Sandy, the company is expected to manage the situation well. Now, as regards its valuation, The Hartford Financial has a forward P/E of 7.2. Its rivals MetLife and Allstate Corporation have forward P/Es of 6.1 and 11.6, respectively. The Hartford Financial is trading on a price-to-book ratio of only 0.4, compared to 0.7 for its industry on average. The Hartford Financial’s ROE is low at 2.2%. Billionaire John Paulson, who trimmed his stake in Hartford in the previous quarter, still holds nearly $380 million in this stock.
Prudential Financial Inc (NYSE:PRU) is also a new insurance holding in Viking Global’s portfolio, valued at $46 million. The company is one of the largest group and individual life insurance providers and variable annuity distributors in the United States. It pays a dividend yield of 3.1% on a payout ratio of 62%. Its rival MetLife pays a lower dividend yield of 2.2%, while competitor AIG does not pay any dividends. Over the past five years, the company’s EPS expanded 3% per year, while its dividends grew by 6.8% annually. The company’s EPS is expected to grow by 12% per year for the next five years. The company has been growing through acquisition, including the recent addition of The Hartford Financial’s life insurance business. Moreover, the company is better positioned than its peers to benefit from organic growth in international markets. Prudential’s investment portfolio is highly exposed to commercial real estate, which is a source of risk. Low interest rate environment is straining the company’s financial performance. Prudential’s stock has a ROE of 3.3%. As regards its valuation, with a forward P/E of 6.8, the stock is trading at a discount to its life insurance industry (with a forward P/E of 7.8). Competitor MetLife has a lower forward P/E of 6.1. Prudential is trading below book value, with a price-to-book ratio of 0.6, compared to its industry’s average of 1.0. Billionaire Ken Griffin’s Citadel has a large position in the stock (see Griffin’s top picks).