Ford Motor Company (NYSE:F), the second biggest U.S. automaker by market share, was also Caxton’s fourth-quarter bet. The hedge fund raised its share holdings in Ford by 13% to about 3.4 million shares or some $44 million. Ford is more attractively valued than some of its peers. However, while it boasts a robust long-term EPS CAGR of 11%, its forecasted EPS growth is still slower than that of its main rivals. However, Ford pays an attractive dividend, while General Motors Co. (GM) does not. Ford has a dividend yield of 3.1% and a payout ratio of 29%. Its dividend has doubled over the past year. Ford’s rebounding growth bodes well for continued dividend growth. Ford’s sales are rising at a healthy clip—up 9.3% year-over-year in February. A pent-up demand in the U.S. amidst a record-high average age of the passenger fleet is likely to sustain the pace of growth in U.S. vehicle sales. Ford sees 2013 U.S. sales rising as much as 8%. The automaker’s sales are also booming in China and India. While Europe remains a drag on profitability, a recovery in sales there can be expected later this year, with Ford returning to a break-even by 2015. In terms of valuation, Ford is trading at 9.2x forward earnings, below its industry multiple of 16.2x. However, given its projected growth, GM may appear a better value at a forward P/E of only 8.4x. Caxton also held a stake in GM at the end of last year.
Macy’s, Inc. (NYSE:M), a leading U.S. department store retailer, was a nearly-$20 million bet by Caxton in the previous quarter. The hedge fund increased its share holding in Macy’s by 761% to 510,000 shares. Macy’s has achieved a fourth consecutive year of double-digit EPS growth and has been beating analyst quarterly EPS expectations for nearly three years. While comparable sales growth has been decelerating—rising 3.7% in 2012, down from 5.3% in 2011 and 4.6% in 2010—it is projected at a still respectable 3.5% in 2013. The 2013 EPS guidance is notably bullish, with EPS expected to increase by as much as 14.2% over the last year. Top-line growth driven by omnichannel integration and robust e-commerce sales as well as improved cost management will boost bottom-line growth. Analysts see Macy’s long-term EPS CAGR at 10.7%. A faster pace of job creation and the stock market gains bode well for the company, too. Macy’s pays a dividend yield of 1.9% on a payout ratio of 21%. Its dividends are due for another annual increase this month, after being doubled over the past year. In terms of valuation, Macy’s looks like a good value. It is trading at only 10.4x forward earnings, below its industry multiple of 14.2x. However, its price-to-book is higher than that of its peer group.
Caterpillar Inc. (NYSE:CAT), the world’s largest construction and mining equipment manufacturer, was a new position in Caxton’s fourth-quarter portfolio. The hedge fund purchased an $11-million stake in the company last quarter. CAT looked pretty inexpensive at the time when Caxton acquired its stake in the company. Currently, the company is trading at 11.1x forward earnings, slightly below its peer group’s forward multiple. Despite the economic headwinds around the world, the company posted record revenues of $65.9 billion and a record EPS of $8.48 in 2012. With a cautious view of the global economy, the company recently projected 2013 revenues of between $60 billion and $68 billion and 2013 EPS of between $7.00 and $9.00. The potential for the upside to these numbers exists, as the company’s two largest markets, U.S. and China, are rebounding. Moreover, U.S. non-residential construction is also recovering, while the mining sector growth, the reason why Caterpillar’s reduced its 2015 outlook back in September 2012, is generally expected to improve next year. Analysts pin the company’s long-term EPS CAGR at a robust 14%. CAT pays a dividend yield of 2.3% on a payout ratio of only 26%. Its five-year annualized dividend growth averaged 10.9%.
