Every quarter, many money managers have to disclose what they've bought and sold, via "13-F" filings. Their latest moves can shine a bright light on smart stock picks.
Today let's look at Barrow, Hanley, Mewhinney, & Strauss, one of the biggest value-focused institutional investment company around, with more than $50 billion in assets as of March 31, 2012. According to the folks at GuruFocus.com, over the 15 years ending in 2011, Barrow, Hanley racked up a cumulative gain of 178%, compared with just 124% for the S&P 500.
The company aims to invest via portfolios that maintain below-average price-to-earnings (P/E) ratios, below-average price-to-book ratios, and above-market-average dividend yields. It also tends to focus on large-cap companies.
Barrow, Hanley's reportable stock portfolio totaled a whopping $50.2 billion in value as of Sept. 30, 2012.
So what does Barrow, Hanley's latest quarterly 13-F filing tell us? Here are a few interesting details.
The biggest new holdings are People's United Financial (Nasdaq: PBCT ) and AMC Networks (Nasdaq: AMCX ) . New England-based bank People's United has been growing via acquisitions and has a solid commercial banking business, but it has several red flags, too, such as a steep tier-1 risk-adjusted capital ratio and a high net noninterest expense.
Among holdings in which Barrow, Hanley increased its stake were Emerson Electric (NYSE: EMR ) and Sysco (NYSE: SYY ) . Emerson Electric, recently yielding 3.3%, has cut back its projections for the year as it fights sluggishness in Europe and pressure on profits from a strengthening dollar. In a recent quarter, orders were flat to down 5% . Some analysts are lukewarm on it and have downgraded it, but it sports a solid growth rate, a reasonable valuation, and a great dividend track record. It's also expanding its scope, serving marine vessels, for example, via an acquisition from Johnson Controls (NYSE: JCI ) . Its last quarter saw unexciting sales growth, but strong profit margins – in a difficult economic environment.
Sysco (NYSE: SYY ) , yielding 3.6%, is America's food distribution titan with a leading market share of 17%. Business has slowed recently, in part because of rising food prices and sluggish restaurant traffic. Still, it's a dividend titan, and has been able to maintain its profit margins while cutting costs. An improving economy should boost restaurant traffic, benefiting Sysco -- eventually.
Barrow, Hanley reduced its stake in companies such as Applied Materials (Nasdaq: AMAT ) , a semiconductor fabrication equipment maker that yields about 3.5%. This is a very cyclical business, with revenue, earnings, and orders down recently. Bears worry that the chip industry isn't yet in a strong rebound phase, and Applied Materials has lowered its own outlook. Its recent quarterly revenue was down, but still better than some expected. Meanwhile, it's planning to buy back billions of dollars of its own shares.
Finally, Barrow, Hanley's biggest closed positions included Cooper Industries (NYSE: CBE ) and CBS (NYSE: CBS ) . Other closed positions of interest include Pentair (NYSE: PNR ) , yielding 1.8%, which recently hit a 52-week high.
Pentair (NYSE: PNR ) , down 4%, has been posting rising revenue and has some investors excited about its merger with Tyco's flow-control business. That should help Pentair cut costs significantly while expanding into emerging markets such as Asia. It will also double the company's size. Pentair has been busy developing new products, too, such as improved valves and water filtering systems.
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, and 13-F forms can be great places to find intriguing candidates for our portfolios.
To get a handle on the semiconductor business, learn more about Intel, which finds itself in a precarious situation long term if it doesn't find new avenues for growth. In this premium research report on Intel, our analyst runs through all of the key topics investors should understand about the chip giant. Better yet, you'll continue to receive updates for an entire year. Click here now to learn more.