Portfolio Highlights: June 2021

Quarterly Movers and Shakers

During the past three months, the S&P 500 index jumped 10% as first quarter GDP growth increased 6.4% due to widespread COVID-19 vaccinations, lower unemployment and a consumer-fueled recovery. The following high-quality stocks generated awesome 18% or better gains during the same period.

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UPS Delivers Record Results (UPS)

UPS delivered record first quarter results with sales increasing 27% to $22.9 billion and net income and EPS up nearly fivefold to $4.8 billion and $5.47, respectively. By business segment, U.S. Domestic revenue increased 22% to $14 billion on a 10% increase in revenue per piece. International revenue increased 36% to $4.6 billion, led by Asia and Europe. Supply Chain and Freight revenue increased 34% to $4.3 billion, driven by record growth from Healthcare activities including the delivery of 196 million COVID-19 doses with 99.9% on-time delivery. UPS generated free cash flow of $3.7 billion during the quarter. UPS’ stock delivered a hefty 36% gain during the past quarter. Hold.

Facebook $25 Billion Share Buyback (FB)

Facebook reported first quarter revenues rose 48% to $26.2 billion with net income up 94% to $9.5 billion. Free cash flow increased 7% during the quarter to $8.0 billion with the company repurchasing $3.9 billion of its common stock. Facebook has $8.6 billion remaining authorized on the previous share buyback program while announcing a new $25 billion share buyback program. The firm ended the quarter with a fortress balance sheet with more than $64 billion in cash and investments and no long-term debt. Mr. Market “liked” Facebook with the stock up 28% during the past quarter. Hold.

UnitedHealth Healthy Free Cash Flow (UNH)

UnitedHealth Group reported first quarter revenues increased a healthy 9% to $70.2 billion with net earnings and EPS both increasing 44% to $4.86 billion and $5.08, respectively. During the quarter, UnitedHealth’s free cash flow more than doubled to $5.4 billion. The firm returned $2.8 billion to shareholders through dividend payments of $1.2 billion and share repurchases of $1.65 billion. During the past two years, UnitedHealth Group’s stock has provided a healthy 81% total return. Hold.

Raytheon Increased Dividend 7% (RTX)

Raytheon reported first quarter revenues rose 34% to $15.3 billion with net income increasing to $753 million. RTX distributed $1.1 billion to shareholders through dividends of $705 million and share repurchases of $375 million. Based on a strong cash position, RTX increased the second quarter dividend by more than 7% with plans to repurchase at least $2.0 billion of shares in 2021. Raytheon’s stock soared 23% during the past quarter. Hold.

Oracle Increased Dividend 33% (ORCL)

Oracle reported third quarter revenues increased 3% to $10.1 billion with net income up 95% to $5 billion. During the quarter, Oracle repurchased $4 billion of its shares. Trailing twelve-month free cash flow increased 3% to $12.8 billion. Oracle increased the quarterly dividend by 33% to $0.24 per share and the share buyback authorization by $20 billion. Over the past eight years, Oracle has provided a divine 161% total return. Hold.

Berkshire Hathaway $6.6 Billion Buyback (BRK-A)

Berkshire’s revenues increased 6% during the first quarter to $64.7 billion with operating earnings rising 19.5% to $7 billion as many of Berkshire’s businesses experienced a significant recovery in revenues and earnings. Free cash flow rose 77% during the first quarter to $6.8 billion with Berkshire repurchasing $6.6 billion of its common stock. Berkshire’s stock has provided a more than tenfold tasty buffet of gains over the last 21 years. Hold.

Alphabet Inc. $50 Billion Share Buyback (GOOG)

Alphabet reported first quarter revenues rose 34% to $55.3 billion with net income rising more than 160% to $17.9 billion. This strong performance was driven by elevated consumer activity online and broadbased growth in advertiser revenue. Alphabet’s free cash flow more than doubled during the first quarter to $13.3 billion with the company repurchasing $11.4 billion of its common shares. Alphabet authorized a new $50.0 billion share buyback program. Over the past decade, Alphabet’s stock has googled up an 846% gain. Hold.

T. Rowe Price Revenues Up 25% (TROW)

T. Rowe Price reported first quarter revenues rose 25% to $1.8 billion with net income more than doubling to $749.4 million. Assets under management ended the quarter at $1.52 trillion, a $47.5 billion or 3.2% increase since year end. T. Rowe Price remains debt-free with ample liquidity including $6.9 billion in cash and investments. During the past quarter, T. Rowe Price repurchased $267.6 million of its common stock. Over the past decade, T. Rowe Price’s stock has more than tripled. Hold.

General Dynamics $89.6 Billion Backlog (GD)

General Dynamics reported first quarter revenue increased 7% to $9.4 billion with net income up slightly to $708 million and EPS up 2.1% to $2.48. During the quarter, the company paid $315 million in dividends and repurchased about 4.6 million shares of its common stock for $744 million at an average price of $161.38 per share. Orders remained strong across the company with a book-to-bill ratio of 1-to-1 led by a book-to-bill ratio of 1.3-to-1 in Aerospace. Backlog grew 4.5% from the prior year to $89.6 billion. Management’s outlook for the full year is for revenues to increase 3% to $39 billion with EPS in the range of $11.00-$11.05. Free cash flow is expected to increase in 2021 from already strong levels, which may lead to further dividend increases and share repurchases. General Dynamics’ stock marched 16% higher during the past quarter. Hold.

3M Free Cash Flow +56% (MMM)

3M reported first quarter sales increased 9.6% to $8.9 billion with net earnings up 24% to $1.6 billion. Sales in the Safety & Industrial segment grew 13.7%, due to high demand for respirators. During the quarter, 3M’s free cash flow increased 56% to $1.4 billion. The company returned $1.1 billion to shareholders during the quarter through dividends of $858 million and share repurchases of $231 million. 3M reduced total debt by $600 million, or 3%, strengthening an already strong balance sheet. The company’s full-year guidance remains unchanged with projected 2021 sales growth of 5% to 8% and EPS in the $9.20 to $9.70 range. 3M’s stock posted a 16% gain during the past quarter. Hold.

Cognizant Raised Sales Outlook (CTSH)

Cognizant reported first quarter revenues rose 4% to $4.4 billion with net income up 38% to $505 million and EPS up 42% to $.95. Revenue growth was driven by digital revenue growth of 15% which now represents 44% of total revenue up from 39% in the prior year period. Operating margin expanded to 15.2% during the quarter. Cognizant has over 200,000 associates working in India with the ongoing humanitarian crisis brought on by the pandemic deeply concerning. Cognizant has made a series of investments to support India during this time of need and continues to prioritize the health and safety of all their associates who continue to work from home. Total employee attrition during the quarter was a high 21%, partly due to the pandemic but also due to the intensely competitive war for talent. Cognizant is increasing its investments in recruiting talent with a record 28,000 offers to new graduates. Free cash flow during the quarter declined 76% to $93 million reflecting payments of taxes that had been deferred due to the pandemic. During the quarter, Cognizant paid $128 million in dividends and repurchased $234 million of its common stock at an average price of $75.80 per share. Cognizant has $2.6 billion remaining authorized for future share repurchases. Cognizant spent about $340 million on acquisitions during the quarter to support future growth. The company raised its outlook for sales for the full fiscal 2021 year to a range of $17.8 billion to $18.1 billion, representing 7%-9% growth, with adjusted EPS expected in the range of $3.90-$4.02. Buy.

Ross Stores $1.5 Billion Buyback (ROST)

Ross Stores rang up sales of $4.5 billion with net income of $467 million. Same store sales increased 13% from 2019 levels. First quarter sales results significantly exceeded management’s expectations as the firm benefited from government stimulus payments, ongoing vaccine rollouts, easing of COVID restrictions and pent-up consumer demand. During the quarter, Ross Stores generated $615.9 million in free cash flow with the company paying $101.5 million in dividends. Given the strong cash flow, the company’s Board authorized a new program to repurchase up to $1.5 billion of its common stock through fiscal 2022, with plans to buy back $650 million this year and $850 million in 2022. For this year’s full fiscal year, Ross expects same store sales to increase 7% to 9% from 2019 levels with EPS in the $3.93 to $4.20 range. Buy.

The TJX Companies $1.0-$1.25 Billion Buyback (TJX)

The TJX Companies rang up $10.1 billion in first quarter sales with net income of $534 million. First quarter open-only comparable store sales increased 16%, driven by 40% growth in Home Goods and 12% growth in Marmaxx U.S. TJX announced that its Board has reinstated its share repurchase program. The company plans to repurchase approximately $1.0 billion to $1.25 billion of TJX stock during the fiscal year ending January 29, 2022, and currently has approximately $3.0 billion remaining under its existing stock repurchase program. TJX also reinstated its dividend which had been prudently suspended during store closures caused by the COVID-19 pandemic. TJX continues to see strong second quarter overall open-only comp store sales trends similar to the first quarter. Buy.

Disclaimer: Copying, reproduction or quotation is strictly prohibited without written permission. Information presented here was obtained from sources believed to be reliable but accuracy and ...

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William K. 1 year ago Member's comment

Certainly some are doing very well. Hooray for them, no doubt.The unfortunate thing isthat there is not enough prosperity to go around and thus there are others who see far less sunshine.

Reality is seldom "fair" and that is just how it is.