Legg Mason Capital is a publicly traded mutual fund, overseeing some $3.8 billion. The fund was founded by Ernie Kiehne and Bill Miller in the early 80s. Outlined below are some of the key takeaways and interesting moves that caught my attention in Legg Mason’s recent SEC filing that revealed its public-equity holdings (see Legg’s portfolio here).
Dumping the duck
Legg Mason sold off its entire stake of AFLAC Incorporated (NYSE:AFL),which was 1.8% of the fund’s portfolio. AFLAC Incorporated (NYS:AFL), with its famous duck mascot, has been hit hard thanks to the economic volatility, fluctuations of the yen against the dollar and low interest rates.
AFLAC Incorporated (NYS:AFL)’s 2013 outlook shows sales in the U.S. growing only 0.5% in 2013. What’s more is that analysts expect EPS to be down 6.3% in 2013 year-over-year. Low interest rates will continue to put a strain on investment income, where the company’s investment portfolio is about 43% invested in Japanese government bonds.
Buying retail and credit
A couple of new additions to the Legg Mason portfolio include Target Corporation (NYSE:TGT) and Capital One Financial Corp. (NYSE:COF). Target Corporation (NYS:TGT)’s current goal is to keep taking market share from major rival Wal-Mart Stores, Inc. (NYSE:WMT). Part of this will come as Target Corporation (NYS:TGT) focuses more on consumable items. Some of the big long-term goals for Target include attaining some $100 billion in sales and $8.00 or more in earnings per share by 2017.
Helping the company meet these goals will be store remodeling and renovations, including improving the store layout, with plans to remodel some 100 locations in fiscal year 2013. As well, plans to introduce CityTarget Stores, which will have a smaller store format, ranging between 60,000 and 100,000 square feet, compared to the current format of 125,000 to 180,000 square feet.
The retailer also recently upped its annual dividend by 20% to $1.44, and expects it to increase to $3.00 per share or more by 2017. The current dividend yield on the stock is 2.1%.
Capital One Financial Corp. (NYSE:COF) got approval from the Federal Reserve earlier this year to to hike its dividend. The company upped its dividend by 500%. Capital One Financial Corp. (NYSE:COF) has also been entering other consumer-banking areas, including deposit taking. Capital One acquired Chevy Chase Bank in February 2009, which has a large retail presence in the Washington D.C. area. Then in February 2012, Capital One acquired ING Direct USA.
On the other side, Capital One has been boosting its credit-card segment with the May 2012 acquisition of HSBC‘s U.S. credit-card business. Still, Capital One trades at 0.8 times book value, which is a 55% discount to the industry average of 1.8 times. This financial company has taken advantage of the financial crisis and added a number of key franchises to its portfolio, positioning it nicely for future growth.
The fund’s top two picks include JPMorgan Chase & Co. (NYSE:JPM) and Apple Inc. (NASDAQ:AAPL), making up approximately 3% and 2.9% of its 13F portfolio, respectively. Legg’s top stock holding, JPMorgan Chase & Co. (NYSE:JPM), has been one of the best- performing major banks in the industry. The bank has been working on building up its deposit franchise, having amassed total deposits of $1.2 trillion at the end of 2012, up 6% year-over-year.