67 WALL STREET, New York - April 22, 2013 - The Wall Street Transcript has just published its Investing in Energy, MLPs and Other Strategies Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with Portfolio Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: Value Investing, Long-Term Investing, High Quality Companies, Investment Strategies, Large Cap Investing, Investing in Energy, Oil and Gas
Companies include: Wells Fargo & Company (WFC), M&T Bank Corp. (MTB), Bank of the Ozarks, Inc. (OZRK), Fastenal Co. (FAST), CarMax Inc. (KMX), Walt Disney Co. (DIS), Union Pacific Corp. (UNP), Berkshire Hathaway Inc. (BRK-A), JPMorgan Chase & Co. (JPM) and many more.
In the following excerpt from the Investing in Energy, MLPs and Other Strategies Report, a portfolio manager discusses his investment philosophy and his portfolio-construction strategy:
TWST: What about an example of something you bought fairly recently?
Mr. Rochon: The reason we bought Union Pacific is, and we talked about this in our annual letter, that we used to own BNSF before Berkshire Hathaway (BRK-A) purchased it. We like the fundamentals of the rail industry. This summer we went to meet the president of a big company, and he told me that he thought that BNSF and Union Pacific are almost a duopoly in the western railroad industry.
Now, one good thing about the western part of the United States is that it's growing very fast thanks to the oil and gas shale development. Volume should continue to go up. We also believe that Union Pacific and BNSF have a very good cost structure, and they have been able to increase the price they charge for their volume.
If you look at the last five years, Union Pacific increased its pricing by about 5% a year, which is very good in this low-inflation environment. We also think they are very shareholder-conscious: They repurchased close to $6 billion of shares in the last few years. If you combine the volume increases, margins improvements and the pricing gains with returning money to shareholders, we think they can grow their earnings per share at about 12% to 15% a year going forward. The p/e ratio is about 15 times, so we think it's reasonable.
TWST: You mentioned a banking theme. What led you there a few years ago and where does that stand now?
Mr. Rochon: For quite a while, bank stocks were very cheap. People were afraid of them, and to some extent, they still are. For example, Wells Fargo and JPMorgan (JPM) trade at about nine times forward earnings. We think that many banks are undervalued. Our two regional banks, M&T Bank and Bank of the Ozarks, are still growing pretty fast by making...
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