While analyzing Gofen & Glossberg’s portfolio, the most interesting thing I found was its continuous focus on long-term targets rather than gaining from short-term market movements. Gofen & Glossberg recently reported their 13F filings on Dec. 31, 2012. The top five holdings in its portfolio are big names in their respective industries. It includes IBM, Procter & Gamble, Exxon Mobil, Johnson & Johnson, and Qualcomm. Its portfolio mainly consists of tech stocks that are around 17% of the total, followed by the consumer goods stocks with ~13%. I have picked up three of my favorite stocks from Gofen’s portfolio, which were also new additions to its portfolio according to the recent filings. Let’s discuss each of these stocks in detail.
This stock has already made a good start for 2013 with around a 10% upside movement. FedEx last month held its management meeting that has further improved investor’s interest in the stock. I feel the company’s cost reduction initiative is a major catalyst for its EPS growth in the long-term. The company is on track with its ~$1.7 billion cost cutting by 2016, which was announced in October last year. Investors will love this stock more when its SG&A cost savings plan, which includes certain changes in the organizational structure and management, starts in May ’13. FedEx will start the voluntary separation of employees in May 2013 with different rounds of departures until May 2014. The employees’ departures are expected on three different dates–May ’13, Nov ’13 and May ’14–and I feel that the maximum number of employees will be leaving on the first date. The total amount of savings anticipated from this plan is ~$500 million in SG&A, and I further expect ~400 million of cost savings in 2014.
Another strong fundamental for FedEx will be the growing package volumes in the Asia Pacific and Europe, which has increased by ~5.8% y/y. This came as a great rescue for the company, enabling it to offset the slow-down in the domestic volume, which witnessed a decline of ~2%. The international growth is a leverage point for FedEx to improve its overall revenue growth. The company has a target of ~$350 million in improving its profits from international locations. Under this plan, FedEx is aiming at merging the routes, better asset utilization in its network, expansion in Europe, etc. For instance, it recently combined two flights originating from Guangzhou, which has helped the company in saving ~$50 million in its operating costs.
Valmont Industries, Inc. (NYSE:VMI)
The company’s stock is on a growth path with around ~36% returns in the last year. The company’s performance is highly attributed to sales of its irrigation systems, which were boosted by long-term pressures in agriculture. Recently, Valmont’s close competitors posted quarter earnings with strong irrigation revenue growth. To reflect the higher demand levels, many analysts have raised their estimates for 4Q12 for Valmont. The organic revenue growth has been increased from 4% to 10%, which would further add ~$10.9 million to the total revenue.
Valmont recently acquired the assets of Pure Metal Galvanizing, which is a leading player in Canada with annual sales of ~$34 million. Via this acquisition, Valmont will broaden its geographical reach, which would strengthen its galvanizing operations in North America. I expect this deal to add ~$0.15 in the EPS of Valmont in 2013. As drought conditions still prevail in the US, farmers are looking for irrigation systems to gain out of the high commodity prices along with reducing the impact of crop loss. This has led to a huge demand for mechanized irrigation systems in the near-term, and all this makes an attractive entry point for the investors in this stock.
