Related Tickers: Microsoft Corporation (NASDAQ:MSFT), FirstEnergy Corp. (NYSE:FE), Intel Corporation (NASDAQ:INTC), Cisco Systems, Inc. (NASDAQ:CSCO), SYSCO Corporation (NYSE:SYY), Apple Inc. (NASDAQ:AAPL)
Several weeks after the end of each quarter, major investors including many hedge funds are required to file 13Fs with the SEC, disclosing many of their long equity positions in U.S. stocks as of the end of that quarter. We process these filings and use them to develop investing strategies; we have found, for example, that the most popular small cap stocks among hedge funds earn an average excess return of 18 percentage points per year (learn more about our small cap strategy). We can also look for individual managers’ top picks in a number of areas, including those with high yields going from current prices and recent dividend payments. Using that criteria, here are First Eagle Investment Management’s five largest positions as of the end of December in stocks with dividend yields of 3% or higher (or see the full list of stocks the fund reported owning):
First Eagle’s largest holding by market value was its more than 46 million shares of Cisco Systems, Inc. (NASDAQ:CSCO). The networking and communications devices company pays a yield of 3.2%, and also looks to be trading in value territory: its trailing and forward P/Es are 12 and 10, respectively. At that pricing Cisco would require very little growth to be a good value, and revenue and earnings have indeed been up. Billionaire Ken Fisher’s Fisher Asset Management had a little over 33 million shares of Cisco Systems, Inc. (NASDAQ:CSCO) in its portfolio at the end of the fourth quarter of 2012 (find Fisher’s favorite stocks).
The similarly named SYSCO Corporation (NYSE:SYY), a $20 billion market cap wholesaler and distributor of food and hospitality products, was another of the fund’s high yield picks. In its most recent quarterly report, sales were up 5% compared to the same period in the previous fiscal year though earnings fell by 12%. The stock is not particularly cheap, and so it’s probably best avoided for value investors, though the dividend yield is a bit above 3%. Ric Dillon’s Diamond Hill Capital disclosed ownership of 4.2 million shares of SYSCO Corporation (NYSE:SYY) in its own 13F filing (research more stocks that Diamond Hill owned).
According to the 13F, First Eagle increased the size of its position in Microsoft Corporation (NASDAQ:MSFT) by 9% between October and December, to a total of more than 27 million shares. Microsoft had just missed being in the top five list of our most popular stocks among hedge funds for the fourth quarter of 2012 (here are more stocks hedge funds loved). The personal and business software company topped analyst expectations last quarter. Its forward P/E is 10, which is of some interest, though projections likely include a temporary bump to earnings from new versions of Windows and Office and Apple Inc. (NASDAQ:AAPL) is actually cheaper in terms of forward earnings.
The fund owned about 13 million shares of FirstEnergy Corp. (NYSE:FE) at the beginning of January. FirstEnergy is an electric utility operating on Ohio, West Virginia, and the mid-Atlantic U.S. As with many utilities, it has little exposure to macro conditions with a beta of 0.3, though the current dividend yield of nearly 5% is high even for the sector. As such it could be an interesting prospect for income or defensive investors. We would be a bit concerned, however, that the stock has been bid up to the point where it now trades at 25 times trailing earnings while revenue has actually been down.
Intel Corporation (NASDAQ:INTC) rounded out our list of dividend picks from First Eagle. A 19% decline in the stock price in the last year, as investors become more concerned about the future of the PC industry, has boosted the dividend yield to 4.2%. Net income has been down, partly due to small decreases on the top line, and the sell-side is actually expecting earnings to come in lower going forward as shown by the fact that the forward earnings multiple is a bit higher than the trailing P/E. Renaissance Technologies, founded by billionaire Jim Simons, was another major shareholder of Intel Corporation (NASDAQ:INTC) (check out Renaissance’s stock picks).
Disclosure: I own no shares of any stocks mentioned in this article.
