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13F Filings: Superstar Investors Buys and Sells

By Jim Fink on August 22, 2012

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If it’s August, 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 May – the last time shareholders were required to update their holdings – I discussed David Einhorn’s new position in Computer Sciences (NYSE: CSC). When I wrote the article, the stock was trading for $26.67 per share and now trades at $33.02, a 23.8% gain in three months!

During the most-recent May-to-August period, 10 out of the 16 stocks highlighted (62.5%) made a profit (a sold stock is considered profitable if the stock went down in price). Making a profit is different from outperforming a stock index, however. Of the 12 stocks bought by the gurus, only four (33%) outperformed the S&P 500’s comparable gain of 8.1%. Of the four stocks sold, three (75%) underperformed the S&P 500, so the gurus were much better bears than bulls. Besides Computer Sciences, other nice winners were all Julian Robertson picks: Apple (NasdaqGS: AAPL) (17.1%), Sherwin-Williams (NYSE: SHW) (12.8%), and HCA Holdings (NYSE: HCA) (11.7%).

Ironically, of the four stocks highlighted from Seth Klarman’s portfolio, both stocks that he had purchased went down in value while the two stocks he had sold went up, which included the third-best performer of all in BP (NYSE: BP) (13.9%). Pathetic, no?

To be perfectly frank, Seth Klarman really stunk out the joint this quarter, underperforming the S&P 500’s 8.1% gain by a wide margin. This is very unusual because Klarman is considered one of the best value investors of all time. Nevertheless, Klarman’s recent fascination with biotech stocks and gold mining stocks – two industries that his classic investment book Margin of Safety would classify as speculations rather than investments — have really done him in. In the first quarter, biotechs Targacept (NasdaqGS: TRGT) and Idenix Pharmaceuticals (NasdaqGM: IDIX) were huge losers for Klarman and he followed those disasters up by buying more Idenix only to see it perform even worse in the second quarter than it did in the first!

Lesson to be learned: don’t follow Klarman’s lead on biotech and gold, but follow him on virtually everything else!

Two other of the superstar investors (Robertson and Einhorn) also had at least one really bad trade. To summarize the losers:

  • Seth Klarman’s Idenix Pharmaceuticals (NasdaqGM: IDIX) (down 35.6%) and NovaGold Resources (NYSE: NG) (down 21.1%)
  • Julian Robertson’s Starbucks (NasdaqGS: SBUX) (down 12.8%)
  • David Einhorn’s General Motors (NYSE: GM) (down 1.2%)

Ironically, the one superstar investor who didn’t pick a single losing stock — Chuck Akre — was also the only one of the four gurus that didn’t have a single stock outperform the S&P 500.  All the other gurus outperformed on at least one of the four stock picks (if you include stocks sold that underperformed the S&P 500). So, I can’t praise Akre despite his lack of losers. The only two gurus worthy of praise are David Einhorn and Julian Robertson because they each outperformed the S&P 500 on three out of their four stock picks. 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.

In my May update of Q1 2012, I removed Bill Ackman despite being the best performer in Q4 2011 because he didn’t trade much in the first quarter, but his trading has picked up again and I want him back. This means one of the current four “superstar investors” has to go. Of the two worst performers this time around – Seth Klarman and Chuck Akre – I’m getting rid of Akre because, well, Klarman is a legend and untouchable.

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

Oracle (NasdaqGS: ORCL)

Buy

NEW

$27.83

King of large-business (i.e., enterprise) database and customer-relationship software. Integrates hardware and software into “engineered” solutions that can’t be replicated by IBM, SAP, Microsoft, Salesforce, or anybody else.

Hewlett-Packard (NYSE: HPQ)

Buy

55.7%

$22.73

Bottom fishing in the largest PC maker in the U.S. (second to Apple globally). Female CEO Meg Whitman, formerly of eBay, is intent on turning things around at this troubled but very cheap (7.5 P/E ratio) computer company.

BP plc (NYSE: BP)

Buy

44.4%

$40.19

Klarman’s Q2 purchases reverse his first-quarter sales and he is now longer the stock than he has been since Q3 2011. A legal settlement with the U.S. government over the 2010 Gulf of Mexico oil spill should remove uncertainty and let the stock trade more in line with its competitors’ higher valuations.

Genworth Financial (NYSE: GNW)

Buy

NEW

$5.91

King of long-term care insurance will benefit from the aging of America and the increasing need for nursing home care. The stock has a book value of $32 and yet trades for less than $6. Can it get any cheaper?

 

2.  David Einhorn

 

Company

Action

% Change in Holding

Average Purchase Price Per Share

Comments

Cigna (NYSE: CI)

Buy

NEW

$45.71

A bet that Obamacare won’t destroy the private health insurance industry. Aetna’s recent acquisition of Medicaid-heavy Coventry Health Care may not be applicable to corporate-heavy Cigna.

Seagate Technology (NYSE: STX)

Buy

59.6%

$26.80

Hard disk-drive manufacturer has gained more than 110% in 2012 and yet still trades for a very low P/E ratio of 5.5. Price momentum plus cheap valuation is the recipe for further gains according to James O’Shaughnessy, author of What Works on Wall Street.

Marvell Technology (NasdaqGS: MRVL)

Buy

61.1%

$10.37

Data storage and mobile semiconductor company released disappointing earnings and the stock tanked. But share repurchases and a very low 0.77 PEG Ratio suggest the stock is near a bottom.

Dell (NasdaqGS: DELL)

Sell

-100%

$14.39

PC maker’s stock tanked on disappointing earnings as it loses market share to Apple’s iPad.

 

3.  Julian Robertson

 

Company

Action

% Change in Holding

Average Purchase Price Per Share

Comments

American International Group (NYSE: AIG)

Buy

NEW

$31.13

U.S. government still owns 53% of insurer at a cost basis of $28.72. Recent quarterly report of $2.3 billion in earnings was third straight to show a profit. Book value is $60.58, almost double the current stock price.

JP Morgan Chase (NYSE: JPM)

Buy

NEW

$35.73

Even after losing $5.8 billion on derivatives trades, the bank made a $5 billion profit in the second quarter. If CEO Jamie Dimon is willing to buy $17.1 million worth of company stock, things can’t be that bad, right?

Barrick Gold (NYSE: ABX)

Buy

29.3%

$60.73

Is Robertson any better at picking gold mining stocks than Klarman? Let’s hope so. Gold typically bottoms in August and rises into year end. This bullish seasonality is not only consistent but strong.

Sirius XM Radio (NasdaqGS: SIRI)

Buy

4975.0%

$2.05

The stock price of the satellite radio provider recently hit a 4-year high on news that Liberty Media (NasdaqGS: LMCA) plans on buying a controlling interest. Federal legislation proposing to put all radio providers on equal royalty-setting standard would help Sirius.

 

4. Bill Ackman

 

Company

Action

% Change in Holding

Average Purchase Price Per Share

Comments

Procter & Gamble (NYSE: PG)

Buy

NEW

$63.84

Ackman said it will be “very hard” to lose any money investing in P&G. Three of Ackman’s previous four stock interventions (75 percent win rate) led to gains of at least 24 percent after six months.

Beam (NYSE: BEAM)

Buy

Unclear

$58.76

Scotch whiskey demand is growing and the U.S. whiskey leader has been the subject of takeover talk, with Diageo and Pernod-Ricard as the likely buyers at up to $90 per share.

Burger King Worldwide (NYSE: BKW)

Buy

NEW

$15.70

Ackman owns 1% of the stock personally in addition to the 11% owned by his hedge fund. Ackman almost doubled his money in McDonald’s five years ago and hopes for the same with Burger King.

Citigroup (NYSE: C)

Sell

-95.8%

$30.06

Inherent environmental uncertainties” of investing in financial institutions worries Ackman, who became unnerved by JP Morgan’s surprise derivatives loss and the LIBOR manipulation scandal.


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