Columbia Partners, an Investment Management firm, had assets of $2.1 billion under management in its equity segment as of March 31, 2013. The firm focuses on those securities which it thinks can outperform the broader market in the long run. This active investment management process followed by Columbia Partners makes each of its stock picks a must watch for investors. Therefore, I have analyzed Columbia Partners’ top three holdings.
| Company | Percent of Portfolio |
|---|---|
| EPR Properties (NYSE:EPR) | 2.76% |
| Core Laboratories N.V. (NYSE:CLB) | 2.91% |
| Acacia Research Corporation (NASDAQ:ACTG) | 2.62% |
A company for income investors
The increase in the global exploration activities, which the company expects to be 7% higher than last year, and the increase in production spending by oil producing companies is expected to benefit Core Laboratories N.V. (NYSE:CLB) in 2013 and 2014. The company is currently working on 40 international deepwater wells in the lower tertiary of the Gulf of Mexico, Europe, Africa, South America, and the Mediterranean Sea. These engagements are expected to generate high revenue in 2013 and 2014.
The company is expected to generate revenue of $525 million this year, up from $496 million last year.
Analysts expect Core Laboratories N.V. (NYSE:CLB) to buy back 1.5 million shares and declare a dividend of $1.29 per share in 2013, compared to $1.11 per share last year, and an expected dividend of $1.56 per share in 2014. This shows consistent effort from the company to distribute the profits to its shareholders. In the first quarter, the company returned almost $62.5 million to its shareholders through dividends and share repurchases.
Moving forward, the company is expected to generate free cash flow of $269.3 million in 2013, an increase of $32.3 million from last year. These levels of cash provide certainty that the company will distribute profit to its shareholders as expected. Therefore, this stock is an attractive opportunity for regular income seeking investors.
Company expanding in the U.S. movie theatre industry
Recently, EPR Properties (NYSE:EPR) expressed its interest to acquire a company that owns 11 theater properties in the U.S. These 11 theaters have a total of 139 screens. The deal is valued at $117.7 million. IBISWorld, an Australian research company, expects revenue of U.S. movie theaters to grow at a rate of 2% in 2013, up from 1.1% in 2012, in response to an increase in consumer spending.
Also, the U.S. movie theater industry is expected to generate total revenue of $14.5 billion this year, from $12.9 billion last year. Thus, theater operators are now concentrating on large megaplexes, where operating cost per seat can be reduced due to higher admissions. Therefore, the profit margin is expected to be 4.2% this year, compared to an average of 2%-3% in the last three years.
The educational segment occupies a prime position in EPR Properties (NYSE:EPR)’s investment portfolio. As of March 31, 2013, EPR had leased out 26 school buildings out of an owned 44 charter schools to Imagine Schools. Imagine Schools operates a chain of public charter schools. Imagine Schools represents 8% of EPR Properties (NYSE:EPR)’s total assets, valued at $235 million. This year, Imagine Schools has revoked nine charter schools leased from EPR Properties (NYSE:EPR) because of educational deficiencies. This revocation may force EPR to charge an impairment loss of $24 million if a solution isn’t found, a remote probability this year.
A leader in patent licensing
Acacia Research Corporation (NASDAQ:ACTG) enters into licensing agreements with various companies, which seek protection from patent claims. Under such licensing agreements, Acacia partners with the patent owners and then seeks to license patents to corporate users. The revenue generated is shared between Acacia and the original patent owner depending on the covenant of the agreement.
Recently, Acacia, through its subsidiaries, entered into such agreement with Citigroup Inc. (NYSE:C), RPX Corp (NASDAQ:RPXC), Target Corporation (NYSE:TGT), and Rite Aid Corporation (NYSE:RAD). These agreements are expected to generate average revenue of $20 million-$40 million each during the life of the agreement.
Acacia, being one of the most active patent dealers in the U.S., is amassing patents in technologies, automobile, and energy. These sectors provide significant revenue opportunity for Acacia because of the vast area that these sectors cover. Also, the company is experiencing an increase in demand for its services because of the diversified portfolio of patents it holds.
Acacia’s patent holdings have grown at a CAGR of 28% over the last four years and are expected to continue their momentum this year. Thus, Acacia will generate revenue of $257 million in 2013 and $335 million in 2014, up from $250 million in 2012.
Conclusion
The revenue of Core Laboratories N.V. (NYSE:CLB) should see a rise in 2013 and 2014 due to its increasing engagements in deepwater hydrocarbons and international crude oil well development. Also, its continuous effort to distribute the profits to its shareholders makes it a certain buy.
The intention of acquiring a company that owns 11 theater properties will provide a platform for Acacia to generate higher revenue in the future. However, the problems related to Imagine Schools may force Acacia’s profit margin to decline in the current year. Therefore, I recommend investors to keep a cautious watch and hold this stock for the time being.
Acacia is expanding its footprint in patent licensing by entering into the technology, automobile, and energy patent markets. This will help Acacia generate higher revenue in 2013 and 2014. Thus, I recommend a buy on this stock.
Madhu Dube has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
The article Pay Attention to These Top Holdings of Columbia Partners originally appeared on Fool.com and is written by Madhu Dube.
Madhu is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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