3 Stocks to Buy From Alaska’s $3,000 Windfall
Alaska Governor Mike Dunleavy announced on Sep. 8 that the state’s 2022 Permanent Fund Dividend (PFD) would be $3,284 per resident. The PFD for 2022 is the highest on record.
The direct deposits started on Sep. 20, with paper checks rolling out beginning the week of Oct. 6. Of the $3,284, $662 is a one-time benefit to cover some of the residents’ energy costs.
The PFD got its start in 1982. The first check was $1,000. The $1.6 billion paid out to Alaska’s residents was generated from the Alaska Permanent Fund'searnings. The fund got its start in 1976. It was established to invest a portion of the state’s oil revenues for future generations.
As of Sep.19, the fund’s valued at $74.4 billion.
Managed by the Alaska Permanent Fund Corporation (APFC), three of the investment manager’s top 50 holdings, as of June 30, have made the fund significant profits to date and should continue to do so for the foreseeable future.
Ameriprise Financial Services
The first of three top holdings by AFPC is Ameriprise Financial Services (AMP), the financial advisory with more than two million clients that was spun off from American Express (AXP) in October 2005.
AFPC is currently holding 199,136 shares of AMP worth $47.3 million as of June 30. Its unrealized gains from its investment are $19.9 million, or a 73.6% gain on its investment.
Now, I can’t tell you over what period it’s made these gains, but what I do know is that AMP stock is up 85.9% over the past five years, more than 35 percentage points higher than the S&P 500, and 24 percentage points more than its former parent.
In its most recent quarterly report (Q2 2022), Ameriprise reported adjusted operating earnings of $5.81, 10% higher than a year earlier. Its assets under management and administration were $1.2 trillion, and its wealth management business generated 80% of the company’s revenues.
With U.S. household financial assets projected to grow 3-6% annually for the foreseeable future, I can see why AFPC likes owning Ameriprise. The company’s target market is clients with $500,000 to $5 million in financial assets. The addressable market for the demographic is more than $20 trillion.
More importantly, 45% are under 45, providing the firm with a long relationship with many of these clients.
According to Barchart’s analyst ratings, the seven covering it rate it a Moderate Buy with a mean target price of $313.22, 18% higher than its current share price.
Iqvia Holdings
Iqvia Holdings (IQV) helps the life sciences industry find and analyze healthcare data to develop and commercialize innovative medical treatments.
AFPC’s gain on its investment in Iqvia was $23.6 million as of June 30. That’s a 72.4% return on its $32.6 million investment in the health-tech company.
Iqvia is the result of the 2016 merger between Quintiles and IMS Health. The name was changed in November 2017. The rationale for the merger was to create a healthcare information, technology, and services solutions business that could accelerate drug development productivity.
How’s Iqvia done since its merger?
From Dec. 31, 2016, through Dec. 31, 2021, Iqvia’s cumulative total return is 271%, double the return of the S&P 500 and the company’s peer group.
In the same period, its revenues grew 101% cumulatively, to $13.87 billion, from $6.90 billion at the end of 2016. In terms of operating income, its profits have increased by 117% to $1.39 billion in 2021, from $642 million five years ago.
Analysts love Iqvia stock. Of the 21 covering it, 16 have it as a Buy, another four rate it Overweight, and one has it as a Hold. Overall, it’s a Buy with a $267.41 target price, 39% higher than its current share price.
It’s an excellent long-term play on healthcare.
Apple
If I had to guess, most institutional investors are probably sitting on substantial unrealized gains from their Apple (AAPL) holdings. At the end of 2021, Berkshire Hathaway’s (BRK.B) unrealized gains were $130 billion, a return of 419%.
As for APFC, its gain at the end of June was $150.2 million, good for a 104% return. It’s got to be one of the fund’s best performers. Apple’s unrealized gains are the second-highest behind only Microsoft (MSFT) at $206 million.
Warren Buffett likes share repurchases because he owns more of a company without having to dish out any cash.
S&P Dow Jones Indices reported on Sep. 22 that of the $219.6 billion of stock buybacks in the second quarter, Apple repurchased $24.6 billion, the most of any U.S. company. The top 20 companies buying back their stock in the second quarter accounted for nearly 47% of all share repurchases. Apple accounted for a quarter of the top 20’s buybacks.
As Apple goes, so goes share repurchases. It’s hard to argue with APFC’s decision to buy Apple.
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Provided Content: Content provided by Barchart. The Globe and Mail was not involved, and material was not reviewed prior to publication.
