UTX, NWL, CCE, WLP, HSH: 5 Stocks Targeted by Billionaire Activist Investor Dan Loeb

Coca Cola Enterprises Inc (NYSE:CCE) is Loeb’s 17th largest 13F holding and pays a 2% dividend yield. In the third quarter, Coca Cola Enterprises’ revenues were down 3.3% year over year, while earnings dropped 7% YOY. Last year, Coca Cola Enterprises gave up its relatively stable North America bottling operations to Coca-Cola for more access to European consumers. The transaction with Coca-Cola included the purchase of bottling operations in Sweden and Norway. Coca-Cola Enterprises trades at a discount to other major bottling peers at only 13x earnings, and appears to be a solid value play.

WellPoint, Inc. (NYSE:WLP) is Loeb’s 19^th largest 13F holding and pays a 2% dividend yield. WellPoint expects operating revenues to be up 1.4% on the back of higher pricing and a rising number of fully insured members. With the recent acquisition of Amerigroup Corp., WellPoint should be able to gain market share in the rapidly growing Medicaid health segment. WellPoint’s 8x P/E is below other managed healthcare peers including the likes of UnitedHealth (10x) and Cinga (10x). Couple its industry-low P/E with a robust expected EPS growth rate of 11.5%, and this stock’s PEG is well below 1.0, making it quite the ‘growth at a reasonable price’ opportunity.

Last but certainly not least, Hillshire Brands Co (NYSE:HSH) pays a dividend yield just under 2% and has traded relatively flat since its mid-2012 spinoff from Sara Lee. With a market cap of around $3.5 billion, it has been speculated that one of the larger packaged meat producers – such as Tyson or Hormel – might be interested in purchasing Hillshire. The reshaped company should be better positioned to reduce costs and make key acquisitions, hence its premium valuation at 17x earnings. A solid demand for the company’s consumer staple products should be enough to drive a long-term earnings growth target of 10% annually.

To recap: we believe that Dan Loeb has found five companies in which recent ‘circumstances’ have redirected their business models, but each pays a solid dividend that will assist with downside protection. United Technologies and WellPoint will see integration risks from their acquisitions, but should come through as industry leaders. Coca-Cola Enterprises and Newell are working on full migrations to the international marketplace. Hillshire is a recent spinoff that is asserting itself as a standalone company, but it may also be a takeover candidate going forward.