If it?s May, it must be time once again for institutional money managers with assets of at least $100 million to update the Securities & Exchange Commission (SEC) on their stock holdings via Schedule 13F.
Back in February ? the last time shareholders were required to update their holdings ? I discussed Bill Ackman?s new position in Fortune Brands Home & Security (NYSE: FBHS). When I wrote the article, the stock was trading for $19.24 per share and now trades at $22.11, a 14.9% gain in three months!
Ironically, the No. 1 best-performing stock mentioned in February?s article was one that Bill Ackman had sold: discount retailer Family Dollar Stores (NYSE: FDO), which was up 20.6%. Similarly, of the four stocks highlighted from David Einhorn?s portfolio, all three stocks that he had purchased went down in value while the one stock he had sold went up: P&C insurer Travelers (NYSE: TRV). Pathetic, no?
During the most-recent February-to-May period, only five out of 16 stocks highlighted made a profit (a sold stock is considered profitable if the stock went down in price). All five winning trades outperformed the S&P 500?s comparable return of -3.6%, but that?s not saying much. Besides Fortune Brands H&S, other winners included Chuck Akre?s Ross Stores (NasdaqGS: ROST) (12.6%) and Seth Klarman?s Tronox (OTC Markets: TROX.PK) (9.9%).
To be perfectly frank, several superstar picks this quarter were real stinkers, underperforming the S&P 500?s 3.6% loss by a wide margin. To wit:
- Seth Klarman?s biotech bets: ?Targacept (NasdaqGS: TRGT) (down 37.5%) and Idenix Pharmaceuticals (NasdaqGM: IDIX).
- David Einhorn?s tech bets: Dell (NasdaqGS: DELL) (down 14.9%) and Xerox (NYSE: XRX) (down 12.8%)
- Chuck Akre?s financial bets: ?Hartford Financial Services (NYSE: HIG) (down 16.3%) and Enstar Group (NasdaqGS: ESGR) (down 6.1%).
Just goes to show you that mindlessly piggybacking on anybody else?s picks without doing your own research is no sure-fire way to beat the market.
Nevertheless, these quarterly SEC filings are a gold mine of information as to what the smartest investors are buying and selling. A timely review of them can make you money. With that in mind, I thought I would vet the most recent set of SEC filings to see if there are any more hidden gems ready to make big moves.
Even though Bill Ackman performed the best of the four gurus, I am going to replace him with Julian Robertson this time around because Ackman didn?t trade much during the first quarter of 2012. Apparently, he has been too busy trying to turn around existing holdings JC Penney (NYSE: JCP) and Canadian Pacific Railway (NYSE: CP) to trade much. Look for Ackman?s trades to return in my ?superstar investor? report next quarter. I?m also skipping Warren Buffett because these days he spends most of his time focused on buying entire businesses and leaves most of Berkshire Hathaway?s stock trading to Todd Coombs and Ted Weschler.
I don?t list all guru transactions, just ones that I personally find noteworthy. If you also have a voyeuristic streak in you, read on.
1. Seth Klarman
| Company | Action | % Change in Holding | Average Purchase Price Per Share | Comments |
| Idenix Pharmaceuticals (NasdaqGM: IDIX) | Buy | 45.6% | $11.02 | Focuses on hepatitis-C treatment. World-wide Hep-C market could reach $16 billion in 2015. Buyouts of Hep-C rivals Pharmassat and Inhibitex could mean Idenix is next. Zero debt. |
| NovaGold Resources (NYSE: NG) | Buy | 33.9% | $7.95 | Pre-production junior gold miner with low-risk properties in Canada and the U.S. Net cash of $200 million. Klarman thinks gold miners are cheaper than gold bullion right now. |
| Microsoft (NYSE: MSFT) | Sell | -41.7% | $28.73 | Computer software giant experienced its largest first-quarter rally of the past decade. Klarman is taking profits. |
| BP plc (NYSE: BP) | Sell | -22.3% | $42.42 | Criminal charges against a BP engineer may be just the first salvo against BP management officials relating to the 2010 Gulf of Mexico oil spill. Declining crude oil prices at 7-month lows don?t help the bull case. |
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2. ?David Einhorn
| Company | Action | % Change in Holding | Average Purchase Price Per Share | Comments |
| Oaktree Capital Group (NYSE: OAK) | Buy | NEW | $39.41 | April IPO. Global distressed-debt investment manager with $80 billion in assets. Headed by Howard Marks. Oaktree funds do well during market turmoil, so good portfolio hedge. |
| Computer Sciences (NYSE: CSC) | Buy | NEW | $27.03 | Troubled information-technology service provider lost $27.37 per share last year and S&P just cut its credit rating. Einhorn is bottom fishing with the stock near a 10-year low. |
| Microsoft (NasdaqGS: MSFT) | Sell | -50.7% | $28.73 | Like Klarman, taking profits on the software king after a huge first-quarter rally. |
| General Motors (NYSE: GM) | Sell | -22.1% | $23.63 | GM recently lost its title as world?s largest auto manufacturer to Toyota .CEO Ackerson is a telephone guy with no auto industry experience. Pension obligations are a ticking time bomb. |
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3. ?Julian Robertson
| Company | Action | % Change in Holding | Average Purchase Price Per Share | Comments |
| HCA Holdings (NYSE: HCA) | Buy | NEW | $23.64 | HCA is the largest for-profit hospital chain in the U.S. Obamacare is very positive for hospitals because it eliminates need for charity care and boosts full-paid admissions. |
| Starbucks (NasdaqGS: SBUX) | Buy | NEW | $46.66 | Drinking two to three cups of coffee a day lowers the overall risk of death by 10%. |
| Apple (NasdaqGS: AAPL) | Buy | 29.3% | $459.51 | Apple is Robertson?s largest portfolio position (15%). Stock is up 37% in 2012 and yet still trades for only 13.5 times trailing earnings despite analysts expecting 20% annual earnings growth. |
| Sherwin-Williams (NYSE: SHW) | Buy | NEW | $94.60 | In May, U.S. home builder confidence hit a five-year high, unit sales of existing homes hit a two-year high, and prices jumped the most in six years. All good news for this market leader in U.S. home paint that has increased its dividend for 34 consecutive years. |
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4. Chuck Akre
| Company | Action | % Change in Holding | Average Purchase Price Per Share | Comments |
| Moody?s (NYSE: MCO) | Buy | NEW | $36.25 | Credit-rating duopoly with Standard & Poor?s gives Moody?s an economic moat and high profitability. Regulatory changes in Europe are hurting, but U.S. regulation has no teeth. |
| Mastercard (NYSE: MA) | Buy | 43.8% | $366.23 | Akre?s largest portfolio position (12%). Credit-card duopoly with Visa. Asset-light business model generates huge free cash flow with 35% returns on invested capital. |
| Visa (NYSE: V) | Buy | NEW | $103.87 | Less profitable than Mastercard and its larger size means less growth potential, but this second member of the credit-card duopoly is a winner whose stock has actually outperformed Mastercard over the past year. |
| Sears Holdings (NasdaqGS: SHLD) | Buy | NEW | $52.99 | Left-for-dead department store chain has come back to life with a first-quarter profit and well-received plans to spin off a minority stake in Sears Canada and focus on U.S. operations. Majority-owner Eddie Lampert is credited with turning around the retailer, which has gained 60% in 2012. |
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