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 SAC Capital Advisors, run by Steven Cohen. SAC is one of the biggest hedge funds around, with a reportable stock portfolio totaling nearly $19 billion in value, as of June 30, 2012. 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.
SAC Capital's top holdings, as of June 30, were Ensco plc and Murphy Oil. Together, the top 10 holdings represent just 11% of the overall portfolio, because SAC encompasses many hundreds of holdings.
What does SAC Capital's latest quarterly 13F filing tell us? Here are a few interesting details:
New holdings include Phillips 66 (NYSE: PSX ) . The United States’ largest independent oil refiner, it’s the result of a spin-off from ConocoPhillips. It still needs to boost profit margins and grab more market share, but it’s building up its pipeline capacity, and its fracking capacity, as well, while extending rail lines to shale fields. It’s also looking to buy back up to $1 billion worth of shares but, having surged more than 30% in just a few months, it’s not the bargain it might have been earlier.
Among holdings in which SAC Capital increased its stake was Kodiak Oil & Gas (NYSE: KOG ) , a relatively small company with rapidly growing proven reserves. Bears worry, though, about the fact that it’s burning cash more than generating it. It recently reported some net gains instead of net losses, but it has taken on a lot of debt, too.
SAC Capital reduced its stake in lots of companies, including rare-earth mineral miner Molycorp (NYSE: MCP ) , and oil-and-gas explorer and developer McMoRan Exploration (NYSE: MMR ) . Molycorp has plunged nearly 80% over the past year, due mostly to sharply lower prices for rare-earth minerals. It may do well in the long run, when prices rise again, but in the short run, further declines are not out of the question. Gabelli & Co. recently upgraded the stock’s rating, but its appeal is not overwhelming, yet, especially since it has been diluting its stock with substantial additional share issuances.
McMoRan has been hurt by the low price of natural gas and, like Molycorp and plenty of other companies, has been issuing more shares to bolster its position. Its share count has roughly doubled since 2009. It has also been losing money for several years. Some expect the company to be bought eventually by Chevron, with which it’s already doing business. Its recent quarter was disappointing, with the company pointing to pipeline repairs, shipping delays, and declining gas sales. Bulls are hopeful about its majority stake in a promising Davy Jones well in the Gulf of Mexico.
Finally, SAC Capital unloaded several companies, such as ArcelorMittal (NYSE: MT ) , the world's leading steel company. It’s down about 28% over the past year, waiting for the global economic recovery to gain steam, and for auto sales and manufacturing to pick up more. Its geographic diversification and its vertical integration are attractive, and so are its growth prospects in China, despite the slowdown there. Patient investors can collect a dividend yield above 4%, but many are not patient, and some analysts have downgraded the stock.
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. In addition, 13-F forms can be great places to find intriguing candidates for our portfolios.
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