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Every quarter, fund managers have to disclose what they've bought and sold. Their latest moves can shine a bright light on smart stock picks.
Today let's look at SAC Capital Advisors, run by Steven Cohen. SAC is one of the biggest hedge funds around, with a stock portfolio totaling close to $16 billion in value as of Dec. 31, 2011. A fund doesn't easily grow that large without performing well, and indeed, Cohen has reportedly averaged returns of roughly 30% annually over two decades.
The fund's top holdings as of Dec. 31 were Apple, Weatherford International, and Gilead Sciences. Together they represent just 4.9% of the overall portfolio, though, since SAC encompasses nearly 1,900 holdings.
So what does SAC Capital's latest quarterly 13F filing tell us? Here are a few interesting details:
New holdings include Aeterna Zentaris (Nasdaq: AEZS ) , which has many hopeful about the cancer drug perifosine that it's working on with Keryx Biopharmaceuticals. Phase 3 results for its use against colon cancer are due very soon, with results against blood cancer coming later. Shares have been rather volatile lately, and poor test results will knock them down, but the company has more potential in its pipeline, too.
SAC upped its stake in lots of companies, such as Chimera Investment (NYSE: CIM ) . The mortgage REIT has drawn much interest with its dividend yield recently near 15%. But it's not without risk. In fact, Chimera has invested in riskier (and higher-yielding) assets than many of its peers, while taking on less debt than they do. For those who handle risk, Chimera is positioned to take advantage of opportunities out there, such as those brought on by trouble in Europe.
Among the many companies in which SAC reduced its stake are Sirius XM Radio (Nasdaq: SIRI ) and Corning (NYSE: GLW ) . Sirius has seen its revenue growth slow, but its profitability and cash flow have been growing well, and it sports a subscribership well above 20 million. Some think that a deep-pocketed tech company will buy Sirius, but my colleague Rick Munarriz doubts that. While SAC unloaded shares of Corning, many viewed them as bargains. The innovative company has a solid balance sheet and a very successful product in its Gorilla Glass, found in many devices such as smartphones and tablets. Bears worry about competition, though, as well as the low-profit LCD screen business.
Finally, SAC unloaded plenty of companies completely, such as InterDigital (Nasdaq: IDCC ) . The company may have decided not to put itself on the block, but it does seem poised to sell off some of its valuable patents. That can generate some much-needed cash for the company, but it's not a great long-term business model.
We should never blindly copy any investor's moves, no matter how talented he or she may be. But it can be useful to keep an eye on what smart folks are doing. 13F forms can be great places to find intriguing candidates for our portfolios.
If you're not too excited about InterDigital but still want to profit from the explosive growth of the smartphone industry, check out our special free report, "The Next Trillion-Dollar Revolution," which will introduce you to a much more compelling investment.