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 investment advisory firm Douglass Winthrop Advisors. It's of interest because it employs a Foolish "low-turnover, buy and hold strategy " – and it has been served well by that, too. Since its inception roughly a decade ago, its equities investments have averaged annual gains of 8% , versus 6.8% for the S&P 500. Management noted in a recent letter to shareholders:
As committed long-term investors we keep our clients invested through good days and the inevitable bad ones. While this makes for some queasy moments, our clients understand that what really matters are long-term returns net of fees and taxes.
The company's reportable stock portfolio totaled $737 million in value as of September 30, 2012.
So what does Douglass Winthrop's latest quarterly 13F filing tell us? Here are a few interesting details:
The biggest new holdings are Duke Energy (NYSE: DUK ) and Cenovus Energy (NYSE: CVE ) . Other new holdings of interest include Exelon (NYSE: EXC ) (another energy concern), and Sherwin-Williams (NYSE: SHW ) . America's largest nuclear-power company, Exelon is also involved in more traditional energy-generation businesses, as well. It's not a very volatile stock, but it's trading near a 52-week low, suffering, in part, because of the relatively high cost of nuclear energy in an environment of very low gas prices. The current situation won't last forever, though, and for patient investors, the stock recently yielded a hefty 6.9% (though some doubt its sustainability). It carries a lighter debt load than many peers, as well, and is expanding into solar and wind power. It might get some aid from a government subsidy, too.
Sherwin-Williams (NYSE: SHW ) is poised to benefit from the recovering housing market, and it recently bought global paint giant Comex, based in Mexico, for $2.3 billion. Some don't like that the deal will add to the company's debt, but others see it as a smart strategic move. Sherwin-Williams is growing in developing economies such as Brazil. Some see the stock as pricey now, but others point out that it has often traded at a premium.
Among holdings in which Douglass Winthrop increased its stake was U.K.-based telecom giant Vodafone (NASDAQ: VOD ) , which sports a 4% dividend yield, and has bulls excited about the projected growth of 4G technology and the company's "Smart II" low-cost, mass-market smartphone. They also like its 45% interest in Verizon Wireless that has generated billions in cash, and its entry into the promising mobile payments market. On the other hand, it offers considerable uncertainty, and doesn't appear to be bargain-priced .
Douglass Winthrop reduced its stake in lots of companies, including energy giant Schlumberger (NYSE: SLB ) . It's in the business of helping companies find and extract oil and gas. If fracking becomes more regulated, that could help Schlumberger, as it's the second-largest fracking supplier, and its technology and offerings may help frackers be kinder to the environment. Meanwhile, though, the company has warned of a weak fourth quarter due to delays and general economic softness.
Finally, Douglass Winthrop's biggest closed positions were BHP Billiton Ltd. (NYSE: BHP ) and Cisco Systems (NASDAQ: CSCO ) . Other closed positions of interest include Walter Energy (NYSE: WLT ) and FirstMerit (NASDAQ: FMER ) . Walter produces metallurgical coal for the steel industry, among other things, and got a boost when China recently affirmed development and growth plans. There has been some speculation, too, that the company might be bought out, perhaps by BHP Billiton. Walter's earnings took a hit recently, but revenues have been growing at an accelerating clip. Still, it's on shaky ground, and is wisely focusing on cost-cutting.
Ohio-based bank FirstMerit has been growing, for example expanding further in Ohio, as well as in Wisconsin and Michigan, via a purchase of Citizens Republic Bancorp (UNKNOWN: CRBC.DL ) . Fans like its 4.5% dividend yield and relatively conservative management . It has reported 54 consecutive profitable quarters, throughout some turbulent times.
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. Therefore, 13-F forms can be great places to find intriguing candidates for our portfolios.
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