Bourgeon Capital Management Reveals Top Picks for Q3, With JPMorgan Chase & Co. (JPM) Leading the Pack

Bourgeon Capital Management LLC, founded by John A. Zaro in 1999, operates as a boutique investment counseling firm that aims to serve high net-worth individuals and their families far better than large investment companies. The Connecticut-based asset manager predominantly seeks to invest in companies with strong management teams, healthy balance sheets, and growing cash flows. Precisely, Mr. Zaro’s investment firm attempts to find good companies encountering short-term difficulties that offer attractive investment opportunities over a long-term horizon.

Prior to starting his own firm, Mr. Zaro served as senior managing director and partner at Warburg Pincus Asset Management, served as a portfolio manager and alpha target manager for J.P. Morgan Investment Management, and worked at Morgan Stanley, Jefferies & Company, and Smith Barney. Bourgeon Capital oversees a diversified long-only equity portfolio worth $154.05 million at the end of the second quarter. The boutique investment firm’s ten largest holdings accounted for approximately one-third of its equity portfolio. Without further ado, let’s have a look at the five largest equity holdings within Bourgeon Capital’s portfolio as of the end of June.

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#5. Becton Dickinson and Co (NYSE:BDX)

 – Shares Owned by Bourgeon Capital (as of June 30): 29,265

 – Value of Bourgeon Capital’s Holding (as of June 30): $4.96 Million

Bourgeon Capital Management owns 29,265 shares of Becton Dickinson and Co (NYSE:BDX) as of the end of the second quarter, 370 shares more than it did at the end of the first quarter. The upped stake was worth $4.96 million on June 30 and accounted for 3.2% of the value of the investment firm’s equity portfolio. The shares of the medical technology company engaged in the development and sale of a wide portfolio of medical supplies, devices, laboratory equipment, and diagnostic products are up by 14% thus far in 2016. The company’s multi-billion-dollar acquisition of medical technology company CareFusion in late-March of 2015 doubled the size of Becton’s medical products division. Becton Dickinson reported revenue of $3.07 billion for the first three months of 2016, up by 49.6% year-over-year, with the increase reflecting the addition of $1.02 billion in CareFusion revenue. Revenue growth for the company’s legacy operations was predominantly driven by volume, and was offset by foreign currency headwinds. Jim Simons’ Renaissance Technologies owned roughly 755,000 shares of Becton Dickinson and Co (NYSE:BDX) at the end of March.

#4. Merck & Co. Inc. (NYSE:MRK)

 – Shares Owned by Bourgeon Capital (as of June 30): 87,250

 – Value of Bourgeon Capital’s Holding (as of June 30): $5.03 Million

The Connecticut-based asset manager reduced its exposure to Merck & Co. Inc. (NYSE:MRK) by 1,200 shares during the three-month period ending June 30, to 87,250 shares. Fresh media reports suggest that the New Jersey-based drugmaker is interested in acquiring biotechnology giant Biogen Inc. (NASDAQ:BIIB), raising the prospect of yet another mega-deal in the healthcare space. Biogen dominates the market for multiple-sclerosis drugs and spent heavily on developing potential treatments for Alzheimer’s, so a possible acquisition of Biogen would enable Merck to inject freshness into its top-line growth. In early-June, Merck agreed to acquire privately-held pharmaceutical company Afferent Pharmaceuticals for an upfront payment of $500 million in cash and additional milestone payments of up to $750 million. Afferent’s lead drug candidate is designed as a possible treatment for chronic refractory cough and idiopathic pulmonary fibrosis with cough. Merck shares are 10% in the green year-to-date. HealthInvest Partners AB, founded by Anders Hallberg and Carl Bennet, owns 224,100 shares of Merck & Co. Inc. (NYSE:MRK) as of June 30.

The next page of this article will reveal three other stocks favored by Bourgeon Capital.

#3. Cisco Systems Inc. (NASDAQ:CSCO)

 – Shares Owned by Bourgeon Capital (as of June 30): 179,800

 – Value of Bourgeon Capital’s Holding (as of June 30): $5.16 Million

The investment firm founded by John A. Zaro upped its position in Cisco Systems Inc. (NASDAQ:CSCO) by 5% during the second quarter, to 179,800 shares valued at $5.16 million on June 30. UBS analysts recently reiterated their ‘Buy’ rating on the networking giant, saying that the company has a “significant head start” over industry peers in Wi-Fi networking equipment due to the acquisition of Meraki, a leader in cloud-controlled Wi-Fi, routing and security. UBS analysts, who have a price target of $32 on Cisco Systems, said the company is the leader in the Cloud Wi-Fi market with a share of approximately 75%. The Enterprise Wi-Fi market grew by mid-single digits last year, but the segment’s growth is anticipated to accelerate by 11% annually through 2020. Cisco Systems has seen its market value increase by 12% since the beginning of 2016. Donald Yacktman’s Yacktman Asset Management was the owner of 28.15 million shares of Cisco Systems Inc. (NASDAQ:CSCO) at the end of June.

#2. Weyerhaeuser Co (NYSE:WY)

 – Shares Owned by Bourgeon Capital (as of June 30): 176,632

 – Value of Bourgeon Capital’s Holding (as of June 30): $5.26 Million

Bourgeon Capital Management owns 176,632 shares of Weyerhaeuser Co (NYSE:WY) as of June 30, worth $5.26 million. The timberlands-focused REIT has seen the value of its stock increase by 8% since the start of the year. In early-May, Weyerhaeuser agreed to sell its Cellulose Fibers pulp mills to International Paper Company (NYSE:IP) for $2.2 billion in cash. The deal involved five pulp mills and two modified fiber mills that produce pulp used to make various products such as diapers and tissues. The transaction did not include the company’s liquid packaging board facility or newsprint and publishing papers venture. Weyerhaeuser ended up selling its liquid packaging board business for $285 million in cash in mid-June. Charles Paquelet’s Skylands Capital owns 54,620 shares of Weyerhaeuser Co (NYSE:WY) as of the end of the second quarter.

#1. JPMorgan Chase & Co. (NYSE:JPM)

 – Shares Owned by Bourgeon Capital (as of June 30): 97,191

 – Value of Bourgeon Capital’s Holding (as of June 30): $6.04 Million

JPMorgan Chase & Co. (NYSE:JPM) represents the largest position in the Connecticut-based firm’s pool of holdings as of the end of the June quarter, accounting for 3.9% of the value of the firm’s equity portfolio. Bourgeon Capital upped its JPMorgan stake by 2% during the second quarter to 97,191 shares valued at $6.04 million on June 30. Worries that consumers are having a harder time curing later stage delinquencies has put some pressure on the biggest U.S. bank by assets and the overall industry as well. Precisely, credit concerns related to credit card, auto and multi-family lending could eventually result in increased net charge-offs for U.S. lenders. JPMorgan’s second quarter net revenue was $25.2 billion, up by 3% year-over-year, while its net income was $6.2 billion, relatively flat compared to the same quarter of 2015. JPMorgan shares are down by 3% this year. Ken Fisher’s Fisher Asset Management owns nearly 14.00 million shares of JPMorgan Chase & Co. (NYSE:JPM) as of June 30.

Disclosure: None