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3 New Stock Buys From Bill Miller for 2011 - 13481 views
BALTIMORE (Stockpickr) -- Ever since the SEC’s 13F form, which requires institutional investment managers to disclose holdings, fell into public purview in the late 1970s, “standing on the shoulders of giants” has become a popular investment option. By seeing what the professionals are buying, individual investors can invest alongside them, even if their portfolios aren’t big enough to catch the investment manager’s attention.
In the value investing world, there are few giants as big as Legg Mason’s Bill Miller. As the chairman and chief investment officer of Legg Mason Capital Management, Miller heads the firm’s storied Value Trust (LMVTX), a mutual fund that stands near the top of the pack in long-term returns (even if more recent returns have been rocky).
With a renewed focus on finding diamonds in the rough of the equity market, it makes sense to pay attention to what Miller’s LMCM is buying right now -- particularly new additions to the firm’s portfolios.
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With that, here’s a glimpse at a handful of their largest newly initiated positions.
Research In Motion
2011 is starting out to be a strong year for Research in Motion (RIMM), the company behind the BlackBerry smartphone line. Already, shares have seen a 14% rally to start the year -- a welcome change for the company’s shareholders.
Just five or six years ago, RIM enjoyed an enviable market position, with a hefty share of the business smartphone market under its belt, and designs on taking the consumer market too as smartphone purchases climbed.
But the iPhone and Android platforms have largely usurped RIM’s domination of the smartphone market. Instead of focusing on its niche, the company attempted to compete head on with offerings like the BlackBerry Storm, which wasn’t particularly well received by buyers – and the company ceded valuable market share to its new competitors. That said, there’s still considerable reason to bet on the BlackBerry…
While competition has yanked the smartphone crown from RIM, overall the company has been a major beneficiary of the huge shift to smartphones in the U.S. and abroad. So while there are other big players in the space now, RIM’s sales have continued to climb. And because RIM focuses on the more-lucrative enterprise market, the company is able to collect software licensing fees from IT departments as well as from carriers, two revenue streams that do a good job of buoying handset sales. With a bulletproof balance sheet, and a defensive position in a harder-to-enter market, this stock could see continued success in 2011, particularly if management continues to spend cash on innovation.
Legg Mason Capital Management bought 2.99 million shares of RIMM per its latest quarterly filing, a nearly $200 million stake at current price levels.
Research In Motion was one of Credit Suisse's 18 best stock picks for 2011.
For the leaner, meaner General Motors (GM), the adjustment to become a profitable automaker has been much less painful than most of Wall Street anticipated. Now that the company’s shares are publicly traded once again, mutual funds are piling on shares of what’s essentially a completely new company that happens to own all of GM’s brands and production capabilities.
Miller and LMCM are no exception -- the firm bought a 2.6 million-share stake in GM in the last quarter, an $86.3 million stake at current prices.
In all fairness, it’s not just GM’s operating structure that’s changed. The cars have too. Quality is at an all-time high for the Detroit-based carmaker, and the company’s models are seeing success domestically for the first time in years. While Ford (F) is still the leader of the big three, both in terms of quality and financial strength, GM’s still the biggest automaker in the U.S. by sales volume, and the company’s work to close the other gaps has paid off considerably.
As a result of the bankruptcy, GM is still owned in large part by the U.S. and Canadian governments, as well as the auto unions. That’s not likely to change in the near-term, as the sheer percentages owned by these interests make the holdings difficult to liquidate.
Even so, history suggests that these groups (particularly the first two) will remain relatively hands-off, and allow GM’s new management team to keep up their work. This is definitely a stock worth watching in 2011. That said, politics and the economic recovery will both play a major role in GM’s operations. Investors will want to watch these factors closely.
General Motors made a recent list of 10 top hedge fund stock buys.
BlackRock (BLK) has treated investors well in the last several years, consistently hiking its dividend payouts and repurchasing shares to help owners share in the successes of what’s become the largest asset manager in the world. Even with share repurchases on hold (so that the company can be included in the S&P 500 Index), analysts expect that cash to be diverted to dividend payouts instead. Fees from $3.5 trillion in assets under management should do a good job of keeping those payouts afloat.
BlackRock’s product offerings are one of its most attractive attributes for investors. The company has a sticky, massive institutional client base, a factor that’s helped keep AUM at such high levels of late. And the acquisition of Barclays Global Investors has added significant exposure to the retail investor market, thanks in large part to the group’s attractive iShares family of exchange-traded funds.
Although BlackRock has traditionally been thought of as a fixed-income shop, it was one of the first firms to switch its emphasis to equities (others, such as Pimco, have decided to do the same, citing a less attractive fixed-income environment). That has helped attract equity investors to the firm in recent years, as conservatism became a hard-to-come-by attribute for asset managers.
Bill Miller’s firm took a sizable stake in BlackRock (despite its rival status with Legg Mason) in the last quarter. All told, LMCM initiated a $67 million position in the company.
John Paulson also picked up shares of BlackRock in the most-recent period -- in fact, the stock was included in a list of Paulson's 10 best new investment ideas.
It also showed up in a list of five top stocks for the 2011 market rally.
To see the rest of Legg Mason Capital Management’s plays, check out the Bill Miller/LMCM Portfolio on Stockpickr.
-- Written by Jonas Elmerraji in Baltimore.
At the time of publication, author had no positions in stocks mentioned.
Jonas Elmerraji, based out of Baltimore, is the editor and portfolio manager of the Rhino Stock Report, a free investment advisory that returned 15% in 2008. He is a contributor to numerous financial outlets, including Forbes and Investopedia, and has been featured in Investor's Business Daily, in Consumer's Digest and on MSNBC.com.