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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 the Eminence Capital hedge fund company, run by Ricky Sandler, who seeks growing companies in growing industries and out-of-favor companies and industries. He also likes to short stocks, when he finds ones he expects will decline.
The company's reportable stock portfolio totaled $3.3 billion in value as of Sept. 30, 2012.
So what does Eminence Capital's latest quarterly 13F filing tell us? Here are a few interesting details:
The biggest new holdings are Vodafone (Nasdaq: VOD ) and American International Group (NYSE: AIG ) . U.K.-based telecom giant Vodafone offers a 4% dividend yield and has bulls excited about the projected growth of 4G technology and Vodafone's Smart II low-cost, mass-market smartphone. Others are wary of uncertainty and don't see the stock as a bargain. More pluses include its 45% interest in Verizon Wireless that has generated billions in cash and its entry into the promising mobile payments market.
American International Group ran into serious trouble in the recent credit crisis, to say the least, but it's been turning itself around, outperforming expectations for several quarters in a row. Its life insurance and property and casualty insurance businesses have been doing well. To some, it seems quite attractively priced lately, especially relative to peers. Indeed, its P/E ratio was recently below 3 , and its forward P/E of 10 is below the S&P 500 average.
Among holdings in which Eminence Capital increased its stake was business software specialist MicroStrategy (Nasdaq: MSTR ) . Its stock has been whacked in recent months, following news of a management shake-up and a disappointing earnings report. On the plus side, revenue has been growing , though earnings are down over the past few years.
Eminence Capital reduced its stake in companies such as NXP Semiconductors NV (Nasdaq: NXPI ) , which specializes in near-field communications (NFC) chips. Some of its chips help facilitate mobile payment systems, such as on Google's (Nasdaq: GOOG ) Google Wallet service, while others aid digital video surveillance . Sales of mobile phones outfitted with NFC technology are expected to triple this year, to 100 million. NXP does have competition, though, such as Skyworks Solutions (Nasdaq: SWKS ) .
Finally, Eminence Capital's biggest closed position was Lam Research (Nasdaq: LRCX ) . The semiconductor equipment maker has been posting lumpy revenue and earnings numbers in recent years. Combined with Novellus now, though, it has laid out plans to boost its market share in key markets over the coming three to five years, and expects to soon be realizing $100 million annually in cost savings from its merger. Some worry, however, that it's dependent on too few customers. Its net income and free cash flow are down in recent years, too.
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. 13-F forms can be great places to find intriguing candidates for our portfolios.