Three Buys From the Baker Ellis Portfolio: Alexander & Baldwin Inc (ALEX), Baxter International Inc. (BAX), Google Inc (GOOG)

Apart from this, the company estimates a growth of ~10% in revenue in 2013, mainly driven by the company’s acquisition of Gambro, a Swedish medical-equipment manufacturer. This was the biggest acquisition ever made by the company to date. It paid ~$4 billion for the Swedish giant, and it is estimated that the deal will create a cost synergy of ~$300 million. Along with this it is expected that by the second half of the next year Gambro will contribute ~$830 million to Baxter’s total revenue. Nevertheless, this acquisition will also lead the company to some short-term headwinds.

Google Inc (NASDAQ: GOOG)

Google grew ~7% after the declaration of its 4Q 2012 results. It was a solid quarter for the company as the gross revenue increased ~36% on a year-over-year basis. Google ended with over $51 billion in its annual gross revenue, which is a significant milestone for the tech giant. Additionally, what helped increase revenue is that its top 25 advertisers on an average spent ~$150 million/per year. Results also show that YouTube is proving to be a useful asset to Google, as its top 100 advertisers have increased their spending on YouTube ads by 50% in 2012. This was driven by “TrueView” which contributes ~70% of all in-stream ads and the site redesign focused on its channels. With a growing video view time of ~4 billion hours/month and development of more professional programming initiatives, YouTube’s revenue generation for future is intact.

Another aspect of the results was the reallocation of Motorola Mobility’s House business unit. In mid-December, 2012 Google sold Motorola House Business to the Arris Group for ~$2.35 billion. I see the sale of the Home unit as part of the company’s ongoing efforts to streamline the Motorola segment as the unit had a loss of ~$21 million in the fourth quarter itself. Also, the division was facing a potential liability via lawsuit against TiVo incorporated for violating its patents, most of which will have to be met by Google. The sale was the right move by Google, as the same will help it to reduce the over-all legal liability. In addition to this, the management of Motorola has taken an active role in rationalizing the cost and is working on a new smartphone to compete with the iPhone.

The Bottom Line

The recovering housing market of Hawaii and diversification in portfolio will help Alexander’s stock to grow in the future. For Baxter, I expect that R&D initiatives, products in the pipeline, and the recent acquisition of Gambro will give growth to the business. Although the increased expenses of the acquisition will reduce the EPS, in the long run the stock seems to be strong. Last but not least, Google’s ad revenue will be driven by the increasing reach and preference for YouTube. I will advise a buy for all three companies.

The article Three Buys From the Baker Ellis Portfolio originally appeared on and is written by Shweta Dubey.