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 SAC Capital Advisors, run by Steven Cohen. SAC is one of the biggest hedge funds around, with a reportable stock portfolio totaling $20.2 billion in value as of Sept. 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.
The company has been in the news more than usual lately, though, because of an insider-trading scandal. Prosecutors are investigating, with the Securities and Exchange Commission waiting before taking actions of its own.
So what does SAC Capital's latest quarterly 13-F filing tell us? Here are a few interesting details.
The biggest new holdings are Fossil (Nasdaq: FOSL ) and calls on the iShares Russell 2000 ETF (NYSE: IWM ) . Other new holdings of interest include wireless broadband provider Clearwire (Nasdaq: CLWR ) , which recently jumped on speculation that it might be acquired. The company carries a lot of debt (recently more than $4 billion) and is looking to sell some of its spectrum to help pay it down. It's making sure its new LTE standards are compatible with offerings in China. The company's surging share count is worrisome, though, as it dilutes the value of existing shares.
Among holdings in which SAC Capital increased its stake was mortgage REIT American Capital Agency (Nasdaq: AGNC ) , which offers investors a mind-boggling dividend yield near 16%. There are concerns that the dividend may get reduced, but that might not happen for a while.
SAC Capital reduced its stake in lots of companies, including chipmaker Marvell Technology (Nasdaq: MRVL ) . The company's stock seems cheap these days, as weak PC sales have hurt performance. Bulls like Marvell's partnership with LED specialist Cree (Nasdaq: CREE ) to produce a dimmable LED bulb and its potential to profit from the growth of cloud computing, while bears would like to see it profit more from the spread of smartphones. Its presence in Microsoft's (Nasdaq: MSFT ) Surface tablets is promising, but it remains to be seen how successful the Surface will be.
Finally, SAC Capital's biggest closed positions included Ensco (NYSE: ESV ) and Eli Lilly (NYSE: LLY ) . Other closed positions of interest include Dendreon (Nasdaq: DNDN ) and American Capital Mortgage Investment (Nasdaq: MTGE ) . Most investors in Dendreon, maker of expensive prostate-cancer drug Provenge, have lost a lot of money. But expectations may now be so low that the company could perform surprisingly well -- though it's burning through a lot of cash, too. My colleague Brenton Flynn found some interesting details about it in its financial statements.
American Capital Mortgage, meanwhile, recently sported a dividend yield near 14%. It's another mortgage REIT, investing in both agency-backed and non-agency-backed mortgages. There are reasons to worry about the future for mortgage REITs, such as narrower interest rate spreads and the possibility of rising prepayments shrinking profits. Interested investors should read up.
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.