A victory for Ken Fisher?

The stock picks of the billionaire hedge fund manager Ken Fisher have a tendency to outperform the market. During Q2, Fisher Asset Management increased its stake in NIKE, Inc. to a total of 3.7 million shares. At the beginning of the quarter, the hedge fund owned only 50k shares of Nike, so it could be said that Fisher’s team has made quite the confident stock pick.

Renaissance Technologies was also interested in Nike during Q2. It owned 1.6 million shares for the end of June 2012. The success of RT gave its founder Jim Simons the opportunity to build a net worth of 11 billion dollars.

Nike’s revenue was up 16 per cent over the last fiscal year and it has grown a GAGR of 7 per cent. The company’s net income was also up with its posting a 4 per cent growth rate for May 2011. Earnings per share were up 8 per cent. EPS has grown at 6 per cent annual rate for the last 4 fiscal years, whereas the net income has grown at a 4 per cent rate. The board of Nike has recently approved a repurchasing program of 8 billion dollars which is expected to last about 4 years.

NIKE, Inc. is able to charge a price premium since it’s an owner of a global brand. It may be expected that the company is exposed to a poor macro environment, but that is not the case at all: the stock’s beta is 0.9 and it tends to fall or rise about in line with the market. It is up 71 per cent over the last 5 years.

Ken Fisher’s shares in Starbucks

Billionaire Ken Fisher’s stock picks have outperformed the stock market. The positions of his Fisher Asset Management have not changed in size over the second quarter. Comparing the hedge fund’s 13F from Q2 with its Q1’s, we can see that a few stock positions have increased by 2 per cent or decreased by 1 per cent and so on, until we get a peek of Starbucks. The holdings of Fisher Asset Management of the coffee shops rose to 10m shares (for the end of June) from 550k (for the beginning of April). The stock of Starbucks rose with additional 8 per cent in 2012. It is also up 77 per cent in comparison to 5 years ago and it has more than doubled in price for the past 2 years. Another large position in Starbucks is of Columbus Circle Investors with 3.6 m shares.

The third fiscal quarter of Starbucks was characterized by 13 per cent increase in revenue in comparison with the third fiscal quarter in 2011. Marco watchers are worried about the American consumers and a common debate is that whether American should spend 5 dollars for a cup of coffee. Nevertheless, the segment of America reported 7 per cent same-store sales growth. Moreover, the same-store sales have risen with 12 percent in China/Asia-Pacific. Since many fixed costs were held in check, the net income has increased with 19 per cent.

The revenue of Starbucks has grown with 15 per cent and the company’s net income has risen to 16 per cent in comparison to 2011.

Starbucks is a growing business but the catch is that it carries a premium valuation. 27 is the number of the trailing price-to-earnings, and the estimation of forward earnings is 20 per cent EPS growth for 2013.

Starbucks could be compared to other companies which share the same problems – Green Mountain Coffee Roasters, which like Starbucks depends on the demand for coffee, Dunkin Brands, McDonalds and Panera Bread.

Being lampooned as a company which have locations that are within spitting distance of one another, it has still managed to get down to serious business. Moreover, it trumps both McDonalds and Dunkin in terms of recent growth.