General Dynamics Corporation (GD), Garmin Ltd. (GRMN): Institutional Investors Are Buying, But Should You?

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Going forward, analysts forecast only a modest long-term EPS CAGR of 6.6%. Still, the company hopes to gain from its continued development of integrated flight decks for business jets, expansion in the helicopter market, expanded OEM presence in the marine and auto sectors, new strategic alliances and acquisitions, and wellness-focused opportunities.

Interestingly, analysts are generally not convinced in this potential growth story, and some view Garmin as a value trap. Garmin is trading at trailing and forward earnings multiples of 11.6x and 13.8x, respectively. Last quarter, hedge funder Robert Joseph Caruso held almost $184 million in Garmin Ltd. (NASDAQ:GRMN).

Lexington Realty Trust (NYSE:LXP), a REIT that owns and operates single-tenant commercial properties, which are generally net-leased to companies, is also a beneficiary of strong institutional inflows. Last quarter, smart money investors increased their share ownership in this REIT by 10.7% sequentially. Lexington Realty Trust pays a dividend yield of 5.1% on a payout ratio of 59% of its 2013 adjusted FFO guidance midpoint.

The company’s distribution has risen 50% since late 2009, and Lexington Realty Trust says it “believes it has capacity to grow dividends” in the future. Notable advantages of this REIT’s business model include predictable cash flows, long-term leases, operating expenses paid by tenants, and high levels of occupancy.

Lexington Realty Trust’s adjusted FFO inched up in 2012 from the year earlier, and is expected to grow 4.6% this year. The company invested some $247 million last year and expects to see investment volumes jump this year. Trading at 11.5 times its 2013 adjusted FFO guidance midpoint, this REIT is undervalued relative to its peers, with net-lease REITs trading, on average, at a forward multiple of 15.6x. Last quarter, renowned small-cap value investor Chuck Royce held $18.5 million in this stock.

On the whole, this group of stocks comes from all corners of the investment world’s proverbial map, but each offers shareholders at least one aspect of the “value-income-growth” spectrum. Obviously, we’d prefer more than just one of these aspects for any investment, and the trio of Lexington Realty Trust, General Dynamics Corporation (NYSE:GD) and KAR Auction Services offer an attractive valuation, along with solid dividend yields. Garmin has value potential as well, but like most analysts, we’d like to see its macro picture continue developing as it has of late. Healthcare Trust of America, lastly, stands out because of the sheer magnitude of the increase in institutional ownership it has experienced, but it’s hard to go wrong with any member of this “fab five.” Learn why it’s important to pay attention to hedge funds.

Disclosure: none

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