Winton bought shares of Kimberly Clark Corp (NYSE:KMB) and had a total of about 410,000 shares in its portfolio at the end of the fourth quarter. The personal products company, whose brands include Kleenex, Scott, and Huggies, reported a 33% drop in earnings in its most recent quarter compared to the same period in the previous year, though revenue was actually up by a bit. Kimberly Clark trades at 21 times trailing earnings, and while it too has low market exposure we worry that it may be overvalued at that pricing.
Rounding out the fund’s five largest 13F holdings was CVS Caremark Corporation (NYSE:CVS). The pharmacy, which carries trailing and forward P/Es of 17 and 12 respectively, had made our list of the most popular healthcare stocks among hedge funds for the third quarter of 2012 (see the full top ten list). Unlike the other stocks on this list its beta comes in at 1, so it’s not insulated from market downturns, but the pharmacy industry has been seeing some interest in terms of “growth at a reasonable price.” Earnings were up 6% last quarter from their levels in Q4 2011, though we would like to see a higher growth rate to justify the current share price.
These are all fine companies but most of them are trading at rich multiples. If our goal was to beat the 10-year bonds we would have invested in Consolidated Edison, Inc. (NYSE:ED), Verizon Communications Inc. (NYSE:VZ), and Kimberly Clark. However, we want to achieve significant capital gains over the long-term and the best company that can potentially deliver strong capital gains ins CVS Caremark.
Disclosure: I own no shares of any stocks mentioned in this article.