Birmingham Capital Management recently disclosed its 13F filings. The fund majorly invests in consumer goods companies that form ~22% of its portfolio followed by industrial goods companies that are ~16.5% of its portfolio. As per the recent filings, the company entered a new position in Colonial Properties Trust, a Birmingham based real estate investment trust primarily investing in office and retail properties in the US. Aside from that, the fund has increased its positions in around 24 stocks including Energen Corporation (NYSE:EGN), PepsiCo, Inc. (NYSE:PEP), Verizon, AT&T, Philip Morris, ExxonMobil, Duke Energy, McDonald’s, etc. In this article, I have picked three of my favorite stocks from their positions.
| Companies | Increase from the previous filings |
| Philip Morris | 8.00% |
| Energen | 116.00% |
| PepsiCo | 36.00% |
Source: whalewisdom.com
Philip Morris International Inc. (NYSE:PM)
Tobacco companies in the US are currently operating in a gloomy economic environment that was reflected in the underperformance of their stocks in 2H12. Overall cigarette volume growth is limited, which is impacting the total sales of tobacco companies. But, I feel there are two factors which could reverse the scenario in 2013. First, the increase in cigarette prices in the industry. Second, the emerging markets’ growth to offset the decline in the mature markets. On similar lines, the international focus of Philip Morris has helped it to escape the industry’s headwinds. Among the international regions, I am highly confident about Asia as a strong opportunity for the company to improve its consumer base. Markets, such as Indonesia, with limited regulations and overall acceptance of cigarette consumption provide a good potential upside to Philip Morris’s sales volume. I expect the company’s market share in Asia to gradually increase from ~21% in 2009 to ~35% by the end of 2013. This is a significant upside catalyst for the company’s stock, as the Asian operations contribute around 45% to the company’s stock value.
On the less positive side, what might hold back investors is the large tax hikes on cigarettes in the Philippines. It is an important market to the company, as it holds around 90% of the share in that region. These hikes will be gradually increased till 2017. Based on these hikes, I expect the sales volumes to decline by 25% which could drag EPS by ~4 cents in 2013.
However, I feel that despite the mounting macro factors, Philip Morris is well placed with a combination of double digit EPS growth and an attractive ~4% dividend yield. I am bullish on this stock for the long-term.
Energen Corporation (NYSE:EGN)
Energen recently reported its 4Q12 results in which its 2012 overall oil production jumped ~40% as compared to last year. The company witnessed a good year mainly due to its record activities (production increased by ~44%) in the Permian Basin that now forms around 65% of the company’s proved reserves. As a result, the company’s operating revenue increased by ~50% y/y to ~$433 million. The company has announced that it will invest ~$975 million in 2013 focusing mainly on development of its assets in the Permian Basin in Texas. I feel this move will help the company to further boost its production in 2013 which would help in enhancing its revenue. But, on the less positive note, the company’s EPS of ~$0.65 was towards the lower end of the guidance range mainly due to the LOE (lease operating expense) which increased ~1% to ~$12.73 per BOE.
Following the results, the company has increased its quarterly cash dividend by ~3.6% which will be paid on 1 March ’13. This is the 31st consecutive year in which the company has hiked its dividend, raising its yield to ~1.20%. This steady dividend payout provides an attractive risk-return opportunity to the investors.
