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Here's What This Annual 20% Gainer Has Been Buying

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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 Caxton Associates, founded in 1983 by Bruce Kovner. The investment company is known for relatively few  years with negative returns, as well as for average annual gains of about 20% since its inception nearly 30 years ago (per this Wall Street Journal article). That's a powerful record.

Caxton is also known for charging clients dearly for the privilege of going along for the ride. In an industry known for routinely charging 2% of assets annually while also taking 20% of profits, Caxton has long charged 3% and 30%, though that was recently shaved down  to 2.6% and 27.5% -- still very steep. (It's not the only one with such above-average fees.)

The company's reportable stock portfolio totaled $1.6 billion  in value as of Sept. 30, 2012.

Interesting developments
So what does Caxton Associates' latest quarterly 13F filing tell us? Here are a few interesting details:

The biggest new holdings are the SPDR Select Financial Sector ETF (NYSEMKT: XLF  ) and calls on Best Buy (NYSE: BBY  ) . Other new holdings of interest include Brazilian electricity generator Companhia Energetica de Minas Gerais (NYSE: CIG  ) (a.k.a. "Cemig") and Western Asset Mortgage Capital (NYSE: WMC  ) . Cemig generates energy from lots of hydroelectric plants, as well as some thermoelectric plants and wind farms. It has invested in natural gas operations, too. The company took a hit  when the Brazilian government announced plans to cut power costs. Still, it has been posting solid revenue and income growth while lowering its debt, and also offers a 5.2% dividend yield.

Western Asset is a real estate investment trust (REIT) that pays out most of its earnings in dividends -- and it has recently been yielding more than 16%. The company focuses on mortgage-related investments, and invests in both agency-backed and non-agency-backed ones, upping its risk profile some in exchange for the chance of higher returns. It doesn't hurt that a director recently bought  some $300,000 worth of shares and that the company recently increased its dividend payout and announced an additional one, as well.

Among holdings in which Caxton Associates increased its stake was Synovus Financial (NYSE: SNV  ) , which has been improving its credit quality, in part by selling off  distressed assets, as part of a turnaround plan that seems to be working. The bank has reported several quarters in the black now. It doesn't expect to pay off its TARP money until next year, though, and it still has non-performing assets on its books. With its stock up more than 80% over the past year, it's not the bargain it used to be.

Caxton Associates reduced its stake in lots of companies, including VIVUS (NASDAQ: VVUS  ) , which is down more than 50%  from its 52-week high, though still having gained more than 30%  over the past year. The company recently received Food and Drug Administration (FDA) approval for its weight-loss drug, Qsymia, which has just hit pharmacy shelves and has blockbuster potential, given America's obesity problem. The drug poses some possible heart risks, though, and it remains to be seen whether patients and insurers will accept the drug's cost. The stock has fallen in recent months on a rejection from Europe and some disappointing sales numbers. Some even worry about the strength of its patent protection.

Finally, Caxton Associates' biggest closed positions included Freeport McMoRan Copper & Gold (NYSE: FCX  ) and the iShares MSCI EAFE Index Fund ETF (NYSEMKT: EFA  ) . Other closed positions of interest include Arena Pharmaceuticals (NASDAQ: ARNA  ) . Arena is a competitor to VIVUS, with its own anti-obesity drug, Belviq. Belviq is apparently less effective, but safer. Bears are less than thrilled with Arena's "puny" pipeline.

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.

Read/Post Comments (4) | Recommend This Article (3)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 21, 2012, at 10:09 PM, 1biotechguru wrote:

    Come on now, lets get real. Caxton sold out of a 100,000 share position in ARNA and per 12/21/12 Nasdaq reporting sold 303,845 shares and still held 1,595,681 shares of VVUS. How smart are they really? biotechguru

  • Report this Comment On December 22, 2012, at 9:11 AM, SamFreedom wrote:

    I understand you can get away with "just reporting the facts" but there has to be some responsibility in what reporting those facts can imply.... which is called ANALYSIS. You just report like a kid reading a tickertape machine but without any meaningful indicators.

    Did it occur to you, for example, that maybe ARNA is just moving slower than they like? Big deal. That happens when it comes to drug approval, classification and dissemination. It says nothing about the real details of the stock. But you couldn't help but try to sound intelligent with "bears aren't impressed with their puny pipeline" - well, bears have got it wrong ever since ARNA was around $1, haven't they?

    You could say I'm less impressed with your dangerous, irresponsible article.

  • Report this Comment On December 25, 2012, at 8:50 AM, steveh800 wrote:

    They should have sold out entirely in VVUS, and added more ARNA with the several positive events going forward in a few short weeks. My take on their selling of ARNA is their position was up significantly since FDA approval last summer, and they took their huge gains to put into their year end gain pool. It great to show clients they made 100% or more on some key portfolio holdings. There will be alot of money made on ARNA along the way as Belviq sales yield results around the world, with several re-entry points to get back in the game. What they sold, another institution bought you can be sure of.

  • Report this Comment On January 10, 2013, at 5:32 AM, rsinj wrote:

    Instead of looking at what Caxton is holding (they will hold many large positions at one time like a mutual fund) how about we look at what Bruce Kovner bought with his own money and is holding directly?

    Probably his most notable investment over the past year or two has been SNTA. Check his purchases over the past two years and then look at the current price.

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