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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 investing giant Elliott Associates, which was founded in 1977 by Paul Singer. According to the folks at InsiderMonkey.com, the company oversees funds that have beaten the S&P 500 since the 1990s. It can be hard to find data on returns, but a Bloomberg report in 2008 noted that since its inception, Elliott's hedge fund had outperformed the S&P 500 handily, averaging a 14.7% annual return, after fees. The company is known for its activist investing, as it has often bought significant stakes in companies and then tried to influence them. One of its specialties is distressed debt. It recently offered to buy Compuware for $2.35 billion.
The company's reportable stock portfolio totaled $3.0 billion in value as of Sept. 30, 2012.
So what does Elliott Associates' latest quarterly 13F filing tell us? Here are a few interesting details:
The biggest new holdings are BMC Software (Nasdaq: BMC ) and News Corp. (Nasdaq: NWS ) . Other new holdings of interest include mortgage REIT American Capital Agency (Nasdaq: AGNC ) , which recently offered investors a mind-boggling dividend yield above 15%. There are concerns that the dividend may get reduced, but that might not happen for a while. You might still want to be wary, though, as there are some aspects of the company that aren't too appealing.
Among holdings in which Elliott Associates increased its stake was networking and storage products provider Emulex (NYSE: ELX ) , which reported a 43% drop off in storage connectivity products in its last quarter. Elliott Associates now owns more than 11% of the company, and is likely to make some strongly worded suggestions.
Elliott Associates reduced its stake in companies such as oil and gas specialist McMoRan Exploration (NYSE: MMR ) and Brocade Communications (Nasdaq: BRCD ) . McMoRan, it turns out, is being acquired, if things go according to plan, by Freeport-McMoRan (NYSE: FCX ) , along with Plains Exploration and Production (NYSE: PXP ) . Opinions are divided on how smart a move this is, with some investors taking a wait-and-see approach and others wondering if Freeport overpaid. Part of the appeal of McMoRan Exploration is its ability to dig very deep for oil along with its major stake in the promising Davy Jones well in the Gulf of Mexico.
Brocade Communications, with its record of frequently topping analyst expectations in recent quarters, looks like a bargain to some, with its forward P/E ratio of 8. Some see the company as an acquisition target, with companies such as Cisco Systems (Nasdaq: CSCO ) , IBM (NYSE: IBM ) , and EMC (NYSE: EMC ) among those suggested as logical suitors. The company's growth rate has been shrinking in recent years, worrying some investors, but others are very hopeful about its growing involvement in cloud computing and its expansion into areas other than storage.
Finally, Elliott Associates' biggest closed positions included Magna Entertainment and News Corp. (Nasdaq: NWSA ) . Other closed positions of interest include QLogic (Nasdaq: QLGC ) . While some may dismiss QLogic, my colleague Sean Williams sees a lot to like, such as its partnerships with original equipment manufacturers, its competitive position, and growth potential.
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.