MSD Capital’s Top Picks
Asbury Automotive Group, Inc. (NYSE:ABG) is MSD’s second largest holding, and makes up 20% of the firm’s public equity portfolio. Asbury is one of the largest automotive retailers in the United States. Asbury Automotive Group, Inc. (NYSE:ABG)posted fourth-quarter earnings of $0.72 per share, versus $0.55 from the same quarter last year and beat the consensus estimate of $0.65 handily. Earnings before interest and taxes beat consensus estimates by 5%. Asbury did suspend its dividend in 2008 in an effort to boost its cash position, but boding well for Asbury Automotive Group, Inc. (NYSE:ABG) is the S&P’s expected increase in U.S. light vehicle sales to 15.4 million units in 2013, up from 14.4 million in 2012.compared to an industry average of 20%. What’s more is that its net profit margin of 15% is high compared to an industry average of 5%. DineEquity Inc (NYSE:DIN) carries a 4.23% dividend yield and trades at a mere 10.7 times earnings, making the stock a value and income play (read more about why).
PVH Corp (NYSE:PVH) is MSD’s fourth largest holding, and makes up 17.5% of the fund’s portfolio. PVH Corp (NYSE:PVH) has a diversified portfolio of iconic brands, including Calvin Klein, Tommy Hilfiger, and Van Heusen. The stock is up over 30% in the last twelve months, mainly due to its planned acquisition of The Warnaco Group. The acquisition will unite the Calvin Klein brand under one roof. Other Warnaco brands include Speedo, Chaps, Warner’s and, Olga. Meanwhile, the company exited its Izod women’s and Timberland wholesale sportswear businesses last year.
Irrespective of the Warnaco acquisition, expected earnings growth appears to be robust. 2012 showed EPS of $5.38, and analysts estimate 2013 EPS to be $6.39 and 2014 to be $7.45. Putting a 20.5 times price to earnings multiple (the current P/E) on 2014 earnings estimates, the stock appears undervalued by over 22%. PVH Corp (NYSE:PVH) is one of the top three apparel stocks for 2013 (read about all three).
One of Dell’s big sell-offs was WEX Inc (NYSE:WXS), which had previously been Dell’s fourth largest holding and was 13.7% of MSD’s portfolio. WEX, formerly Wright Express Corporation, provides payment and information management solutions, including its top segment, fleet payment solutions, which provides customers with fleet vehicle payment processing services. It appears that WEX is expensive. WEX is currently trading at a price to earnings ratio of 31 times, which is nearly a 200% premium to the S&P 500 P/E ratio. On the other hand, its 5-year average premium to the S&P 500 is only 87%.
Don’t be fooled
The big news for Michael Dell of late has been his plans to take his prized company, Dell, private. However, I figured it would be worthwhile to take a break from the Dell buyout saga to see where else Michael Dell has his fortune invested. DineEquity Inc (NYSE:DIN) is a big bet on a rebounding casual dining market, while Michael Dell’s bets on Asbury Automotive Group, Inc. (NYSE:ABG) and Delphi are broad bets on the auto market. I also like his bet on PVH Corp (NYSE:PVH), which will be quite a bet on the apparel industry, bringing together a number of top brands.
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