Imitation is the sincerest form of flattery, right? Well, when you're learning a new skill, imitation can also be a great way to hone your craft.
If you're learning guitar, you might pick up a book of Jimi Hendrix's licks or download the chords to a couple of Bob Dylan's songs. So when you're trying to become a better investor, it only makes sense to take a peek at what the professional investors are up to.
For the Fools who don't have the time or inclination to pick individual stocks on their own, Shannon Zimmerman at our Champion Funds newsletter has put together a buffet of mutual funds that have collectively outperformed their benchmarks by 14.8%. For the rest of us, we can tune in directly to what some of the major funds are holding.
You see, the SEC requires institutional investment managers who manage $100 million or more to show their cards via quarterly 13-F filings. So this week, in honor of its recent IPO in London, I dug up Third Point LLC's holdings -- and, to make things even more interesting, I cross-referenced those holdings against what players in the Fool's CAPS community had to say about the stocks.
Below are five of Third Point's larger holdings that have also been highly rated by CAPS players.
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of Third Point Stake
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CAPS Rating (out of 5)
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PDL BioPharma (:PDLI)
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$294 million
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****
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NYSE Euronext (:NYX)
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$129 million
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****
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Kansas City
Southern (NYSE:KSU)
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$81 million
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****
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Norfolk
Southern (NYSE:NSC)
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$71 million
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*****
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CSX (NYSE:CSX)
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$66 million
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****
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Sources: CAPS, SEC Filings, and Capital IQ, a division of Standard & Poor's.
Now, before you jump to it and make any hasty moves, remember that we're looking at what Third Point has done in retrospect. For all we know, since its last 13-F filing the firm has drastically reduced its holdings in any or all of the above stocks. With that in mind, here are some thoughts on a few of these stocks to kick off further research.
Railroads -- so hot right now
While the auto industry has been having some pretty high-profile struggles, some very notable investors, including Berkshire Hathaway's (NYSE: BRK-A ) (NYSE: BRK-B ) Warren Buffett and Carl Icahn, have been looking at a much older form of transportation. Similar to airlines, railroads have historically been thought of as a poor investment. Current conditions, though, including the high price of oil, have started to make the rail business look a bit more attractive.
Buffett's primary rail target has been Burlington Northern Santa Fe (NYSE: BNI ) -- Berkshire currently owns a $3.5 billion stake in that company -- but he has also bought up sizeable chunks of Union Pacific and Norfolk Southern. Icahn, meanwhile, has put some of his money into CSX.
CAPS players have generally favored the railroads, as evidenced by the four-star average rating for the group. Last month, my fellow Fool Brian Pacampara also took some time to kick the tires.
Kansas City Southern, the only rail company above that we haven't mentioned yet, has gotten generally good feedback on CAPS. Though one CAPS player, NicieNicie, calls the relatively small rail "too darn speculative to be anything but a 'racetrack' stock," others, such as CAPS All-Star TheStanley, see things differently:
I think companies will be moving a lot of heavy shipping from the west US coast, where labor unions make doing business a bit more expensive, down into Mexico's more than adequate deep water ports. All that heavy freight that would have come into the US through the [West Coast] ports will now be shipped by rail through [Kansas City Southern's] border crossing on [Kansas City] trains. Combined with increased EPS and solid financials [this stock] seems ready [to] roll.
Third Point currently owns a 2.6% chunk of Kansas City Southern. The fund is joined by Lehman Brothers' asset management arm, Neuberger Berman, which owns more than 12% of the company's outstanding shares, and hedge funds Highbridge Capital Management and Columbia Management, which both own 5%-plus stakes.
Eager to read more commentary from the CAPS community on these Third Point-owned stocks? Hop on over to CAPS and start interacting with the other 60,000-plus CAPS players. While you're checking out these stocks, you can also find out more about more than 4,700 other stocks that are currently rated on CAPS.
More CAPS Foolishness:
PDL BioPharma and NYSE Euronext are Rule Breakers selections. Berkshire Hathaway is a Stock Advisor and Inside Value recommendation. Neuberger Berman is a Champion Funds pick. You can check out any of the Fool's newsletters with a 30-day free trial.
Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. The Fool's disclosure policy invests like a pro, but has been told that it plays ball like a girl. It takes that as a compliment.
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