Related tickers: Cisco Systems, Inc. (NASDAQ:CSCO), Microsoft Corporation (NASDAQ:MSFT)
Hedge fund manager Jean-Marie Eveillard has been in finance for more than half a century; first with Societe Generale before taking over the SocGen International Fund. But through a convoluted history that started with S. Bleichroder in Berlin in 1803 through 1999 when Arnhold and S. Bleichroder acquired a majority share in Societe Generale Asset Management Corp, Eveillard finally found himself the portfolio manager for First Eagle Investment Management, part of the $28 billion First Eagle family of funds.
The fund invests heavily in technology, basic materials and finance, and the first five positions in its equity portfolio reflect this strategy. Let’s take a look at this “fab five,” via First Eagle’s latest 13F filing with the SEC.
At number one is Cisco Systems, Inc. (NASDAQ:CSCO), with a current value of $907 million in the fund’s equity portfolio. The network designer and manufacturer fell in sympathy with the rest of the network-equipment sector at the end of last week when F5 Networks, Inc. (NASDAQ:FFIV) cut its guidance for the current quarter. But for the investor looking for a value in the tech sector, Cisco Systems, Inc. (NASDAQ:CSCO) is the better buy against competitors Ericsson and Juniper. Cisco Systems, Inc. (NASDAQ:CSCO)’s trailing price-to-earnings ratio of 12.0x versus 19.0x for Ericsson and 50.3x for Juniper puts its shares ahead of the pack, so to speak. It’s easy to see why Jean-Marie Eveillard is so bullish.
Second on the list is Comcast Corporation (NASDAQ:CMCSK), with a $856 million position in Marie Eveillard’s equity portfolio. The acquisition of NBC helped diversify Comcast Corporation (NASDAQ:CMCSK) from being just a cable company to a global media and technology company. Recent earnings improved 12% and, with a reduction in the percentage of sales devoted to cost, Comcast’s bottom line improved 47% from 2011. In addition, the stock is priced at a mere 2.1 times book value, versus the rest of the sector’s 4.3x average.
Third of the top five is SYSCO Corporation (NYSE:SYY), the food service provider with a market cap of $20 billion. Since 2010, Eveillard has increased his position in SYSCO Corporation (NYSE:SYY) by 207%. The stock has performed very well since the start of the year, gaining 12% to a new 52-week high of $35.62. Recent gains are attributed to the company’s estimated EPS growth rate of 7.47%. Fourth-quarter earnings showed a 7.8% increase in revenue, although an 8.7% increase in COGS caused the bottom line to deteriorate slightly to $1.1 billion from $1.2 billion in 2011.
At number four is Grupo Televisa SAB (ADR) (NYSE:TV). Of the 450 hedge funds followed by Insider Monkey, First Eagle is the second largest holder of stock in the Mexican broadcaster, with 28.4 million shares at a value of $755 million. Given the diversity of Grupo Televisa SAB (ADR) (NYSE:TV) in various Spanish-speaking media assets, the company enjoys a competitive advantage over other potential challengers. As a result, its trailing price-to-earnings ratio of 1.6x compares very favorably to the sector average of 22.4x.
Last but certainly not least is Microsoft Corporation (NASDAQ:MSFT). The technology giant recently announced that it would end support for the Windows XP operating system as users have been transitioning to the new touch-screen Windows 8. Unfortunately, Windows 8 is only running on 3.2% of all PCs. As users begin moving away from the PC and towards smartphones and tablets, Microsoft Corporation (NASDAQ:MSFT) is beginning to look like a dinosaur in the lightning-fast world of mobile computing. It doesn’t help that Vista was a major disappointment and Windows 7 came at a time when consumers were strapped for cash at the height of the recession. Adding insult to injury for Microsoft Corporation (NASDAQ:MSFT), recent earnings show a 5% gain in revenue, but a 12% increase in COGS, which caused a drop in the bottom line of 26% from 2011.
First Eagle’s bottom-up, fundamental approach to investing explains why the fund is invested in some of the leaders in the entertainment and technology sector. From Cisco to Grupo Televisa, each stock is fairly well insulated from any sector-wide shifts that could hammer smaller, less established companies. For a complete look at Jean-Marie Eveillard and First Eagle’s favorite stocks, continue reading here, on Insider Monkey.
Disclosure: none
