Editor: Anonymous Quote: “A person shows what he is
by what he does with what he has.”
Jim ‘Jimmy’ Barrow or 'Rat', the latter a somewhat affectionate albeit cruel moniker he no doubt is not as fond of as were his schoolmates
back in his hometown of Bishopville , South
Carolina
An article touting his business acumen was recently published online on the Swing Trading Daily website and reposted here in its entirety for your reading pleasure.
5 NEW BUY IDEAS FROM VANGUARD’S JAMES BARROW
By Landon Brace
 |
| Jim 'Jimmy' Barrow aka 'Rat' |
James
Barrow is an industry veteran who currently leads the portfolio management team
of the Vanguard Windsor ll and Selected Value Funds. He also founded the
Texas-based investment firm Barrow, Hanley, Mewhinney, and Strauss. Even while
the S&P 500 (SPY)
posted negative returns, Mr. Barrow was able to average an overall return of
over 9% during the previous decade. He has a history of being a deep value
investor and his recent 5 investments may prove to be worth some consideration.
Janus Capital Group, Inc. (JNS) – At the end of the third quarter of 2011 Mr.
Barrow took an increasingly large
stake in Janus with a purchase of 1.2 million shares at an
average cost of $7.54. This latest purchase follows the pattern of investments
since the third quarter of 2010 to bring total holdings of Janus to slightly
over 4.1 million shares. At $6.56, $1.20 higher then its yearly low set in
early November, Janus has clearly been beaten down by the overall decline in
financials. Even after seeing market capitalization sliced in half it has
maintained its strong dividend and currently yields 3%. The current P/E of 7 is
very attractive when compared with rivals Franklin Resources (BEN),
and T Rowe Price Group (TROW). Management continues
to work to improve the performance of many of the firm's
lagging equity funds, which have been a drain on revenue throughout the last
year. Janus’ fixed income funds continue to entice investors and over the long
term this company has great potential to pay off. With Janus’ 3% yield I believe
most investors won’t have a problem maintaining their patience.
Gibraltar Industries, Inc. (ROCK) – Mr. Barrow made his second largestpurchase of
Gibraltar in the third quarter of 2011 since
he began acquiring shares in 2009. His purchase of 560,993 shares at an average
price of $9.46 is paying off quite well so far. At its current closing price of
$14.02, Gibraltar is less then a dollar below
its yearly high of $14.65 set last December. It has been steadily climbing
since touching its yearly low of $7.35 in August and now the question is
whether this company has run its course? Although there have been patches of
good news, the housing market continues to be a grim reminder of the state of
the current economy. Plus, the rising costs of raw materials are further
pinching the already razor thin margins of the building material industry.
Although housing will improve eventually, in the near term Gibraltar
appears to be unsustainable at these levels. With the dividend on hold since
early 2009, it will be hard to expect investors to wait around for the
increases in material demands that will drive Gibraltar
forward.
Medtronic, Inc. (MDT) – For the latest quarter, Mr. Barrow made his
second largest purchase of
medical device maker Medtronic since he began acquiring shares in early 2009.
With slightly over 8 million shares purchased in the third quarter at an
average cost of $34.80, he now holds 25.9 million shares. At $34.61, Medtronic
is slightly off its yearly low of $30.18 set back in August but is nowhere near
its high of $43.33 set in May. The company that specializes in cardiovascular
medical devices has come under increased scrutiny from analysts due to fears of
Medicare reductions driving down procedure volume. Although rival device makers
Boston Scientific (BSX) and St. Jude Medical (STJ)
are feeling the heat as well, Medtronic’s superior operating margin of over 27%
stands out. Medtronic also boasts an impressive P/E of 10.9, and a solid
quarterly dividend yield of 2.7%, leaving competitors St. Jude (STJ)
and Boston Scientific (BSX) in the dust. With
continued discussion of Medicare reform the medical device makers do present a
higher degree of risk than your average stock. This can be seen by the nearly
6% decline in Medtronic’s share price today on an analyst’s report from Wells Fargo
(WFC)
regarding this exact topic. Although, if you are looking for exposure to this
industry, Medtronic is a no brainer.
Sanofi (SNY) – Mr. Barrow only recently began acquiring shares
of Sanofi in the first quarter of 2011. During the third quarter of the same
year he made his largest purchase of Sanofi, 1.6 million shares for an average
cost of $35.97, and now holds over 3.5 million shares in total. Sanofi, a
diversified French pharmaceutical company, has American Depositary Shares
listed on the NYSE trading right between its yearly high and low at $34.49. The
shares are down since touching their yearly high of $40.75 in May, a month
after they acquired Genzyme Corporation in a cash deal. Other than Pfizer, (PFE) Sanofi
has the lowest P/E in the industry at 14.42 and its gross margin is almost
double the industry average at 20.89%. Although it has an impressive yield of
3.8%, investors must keep in mind that they will have foreign tax taken out of
the gross distribution since the company is based in France
Carnival Corporation (CCL) – Mr. Barrow has been purchasing Carnival
for many years, picking it up at rock-bottom prices during the lows of 2009.
During the third quarter of 2011 he acquired 3.7 million shares at an average
cost of $33.16 to bring his total holdings up to 25.7 million. Carnival is well
off its yearly low of $28.52 set back on October 4, but still has a ways to go
before reaching that yearly high of $48.14 set in early January. Although
bookings in Europe have started to slow due to
the economic concerns in that part of the world, North American sales have been
strong and continue to drive the company forward. A dependable 3% dividend from
a travel and leisure company is certainly worth taking notice of in this
environment. Plus, an operating margin of 14.67% that is above the industry
average is noteworthy as well. With bargain-hungry consumers in full force, the
all-inclusive nature of cruises continues to lure consumers to that style of
vacationing. Carnival has proven that the dividend is dependable and with an
increasingly large cash position, a higher return for shareholders shouldn’t be
too far off.
Disclosure: I have no positions in any stocks
mentioned, and no plans to initiate any positions within the next 72 hours.
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