Every quarter, many money managers have to disclose what they've bought and sold, via "13F" filings. Their latest moves can shine a bright light on smart stock picks.
Today, let's look at investing giant Daniel Loeb, founder of the Third Point LLC hedge fund. Loeb is a well-known activist investor, famous for publicly airing his opinions about companies in which he invests and not mincing words when he's displeased. Loeb was instrumental in pointing out discrepancies in former Yahoo! CEO Scott Thompson's biography, paving the way for Yahoo!'s new CEO, Marissa Mayer. Loeb made about $1 billion on his Yahoo! investment over just two years.
More recently, Loeb has looked to break up Sony, with Sony rejecting his plan early in August (and George Clooney weighing in against him, too). Sotheby's auction house is an even more recent target for Loeb.
His activity bears watching because the guy seems to know a thing or two about investing. According to the folks at GuruFocus.com, over the 15 recent years ending in 2012, Loeb racked up a cumulative gain of 758%, compared with just 94% for the S&P 500.
The company's reportable stock portfolio totaled $4.4 billion in value as of June 30, 2013.
So what does Third Point's latest quarterly 13F filing tell us? Here are a few interesting details:
The biggest new holdings are Elan and CF Industries . Ireland-based biotech company Elan is being bought by Michigan-based drug company Perrigo for $8.6 billion. One benefit for Perrigo will be headquartering the new company in Ireland, which will cut its tax rate from around 30% to around 17%. Elan had previously been pursued by Royalty Pharma, whose offers had been deemed too low. It has also been in the news as a stock that investors at the scandal-ridden hedge fund SAC Capital allegedly traded in, with insider information. Perrigo has been making savvy acquisitions and growing rapidly.
Fertilizer concern CF Industries looks attractive with its forward P/E ratio below 7. Like Potash and others, the nitrogen and phosphate specialist may be hurt if Brazil stops importing fertilizer, but that's not likely to happen soon. Russia's exit from a major potash cartel could also spell trouble, via falling prices. Meanwhile, some peers may be hurt by changes in India, but CF is better positioned there due to its product and sales mix. It has also been benefiting from low natural gas prices, as that's used in nitrogen fertilizer. Rising nitrogen prices have helped, too.
Third Point reduced its stake in lots of companies, including International Paper and Constellation Brands. Among holdings in which Third Point increased its stake were Sotheby's and TIBCO Software . Big Data operator TIBCO has been adding recurring-revenue contracts. Of all things, staffing issues pose a problem for the company, though my colleague Anders Bylund remains a "committed owner," seeing its competitors having trouble competing with it. The company has been restructuring, with bulls hoping for improved performance. Its forward P/E of 20.6 is well below its five-year average of 31.
Finally, Third Point's biggest closed positions included Virgin Media and Murphy Oil. Other closed positions of interest include Chimera Investment and ARIAD Pharmaceuticals . Chimera Investment recently yielded 12%, but its payout has been shrinking and may continue to do so. It has taken on more risk than many of its brethren, and has had some trouble filing reports on time. Some have questioned its hefty management fees. Chimera may become less attractive if interest rates rise or if Congress cancels favorable tax treatment for REITs. On the plus side, its second quarter featured a modest bump in book value.
ARIAD received FDA approval for its leukemia drug Iclusig. Its launch wasn't as strong as some had hoped, but in ARIAD's second-quarter report, management cited strong sales growth for the stock and approval for it in Europe. My colleague Brian Orelli sees much potential for ARIAD, but warns that it's not exactly priced at bargain levels these days.
We should never blindly copy any investor's moves, no matter how talented the investor. But it can be useful to keep an eye on what smart folks are doing. 13-F forms can be great places to find intriguing candidates for our portfolios.
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