Here's What This $50 Billion Manager 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 Barrow, Hanley, Mewhinney & Strauss, founded in 1979 and one of the biggest value-focused institutional investment companies around. According to the folks at, over the 15 years ending in 2011, Barrow, Hanley racked up a cumulative gain of 178%, compared with just 124% for the S&P 500. Its massive large-cap value equity fund trailed the S&P 500 over the past year, but beat it over the past decade.

The company aims to invest via portfolios that maintain below-average price-to-earnings (P/E) ratios, below-average price-to-book ratios, and above-market-average dividend yields. It also tends to focus on large-cap companies.

Barrow, Hanley's reportable stock portfolio totaled $49.8 billion in value as of Dec. 31, 2012.

Interesting developments
So what does Barrow, Hanley's latest quarterly 13F filing tell us? Here are a few interesting details:

The biggest new holdings are Pentair and Rockwood Holdings. Other new holdings of interest include ADT (UNKNOWN: ADT.DL  ) , the security specialist recently spun off from Tyco International. The company, which is more than 100  years old, recently reported first-quarter net income up 13% and total revenue up 2%. (Recurring revenue rose a more encouraging 5%.) The company has caught the attention of Carl Icahn disciple and activist investor Keith Meister of Corvex Management, who would like to see some changes. With the support of George Soros, Meister is advocating a whopping buyback of 45% of shares.

Among holdings in which Barrow, Hanley increased its stake was Seadrill (NYSE: SDRL  ) , one of the world's largest oil and gas offshore drillers. The company operates in profitable deepwater drilling regions, among other locations. Bears don't like its debt levels or negative free cash flow, while bulls drool at its whopping 8.8% dividend yield. It enjoys a substantial work backlog as well.

Barrow, Hanley reduced its stake in lots of companies, including Corning (NYSE: GLW  ) and Western Union (NYSE: WU  ) . Corning, which recently yielded 2.9%, is producing glass for LCD displays and smartphones and fiber for telecom networks, among other things. Demand for its Gorilla Glass is strong, generating more than $1 billion in 2012 revenue, and its flexible new Willow Glass is promising, too -- and might end up in new watch-like devices from Apple. Also boding well is an expected uptick in TV sales. Some see the stock as attractively priced at recent levels.

Western Union, meanwhile, has long looked like a bargain, with a dividend yield above 3% and a single-digit P/E ratio. Some worry about its future, however, as new money-transfer systems proliferate -- think PayPal, for example. It's still a huge cash generator, though, and able to buy back many shares to drive value. The company has lowered its prices, raising the specter of profit-margin compression.

Finally, Barrow, Hanley's biggest closed positions included Sonoco Products and Home Depot. Other closed positions of interest include Annaly Capital Management (NYSE: NLY  ) . Annaly sports a dividend yield of about 12.2%, though that payout has been shrinking. The company's recent earnings report offered promising numbers, but also a relatively high rate of mortgage prepayments, which put pressure on profitability. Annaly has been dealing with management turnover as well, and is increasing the risk of its portfolio somewhat via a commercial REIT acquisition.

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.

Annaly Capital Management has a history of paying huge dividends to shareholders. But there are some crucial issues investors have to understand about Annaly's business model before buying the stock. In this brand-new premium research report on the company, our analyst runs through these absolute must-know topics, as well as the future opportunities and pitfalls of their strategy. Click here now to claim your copy.

Read/Post Comments (1) | Recommend This Article (1)

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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 February 15, 2013, at 10:50 AM, turnermuseum wrote:

    Borrow Hanley is in a sweet spot with SDRL

    The scare about GE's faulty screws causing a temporary dip = favorable for those who dollar average large continuing stakes.

    Trust SDRL will do a PR = explaining their exposure which methinks is minimal, after netting out any claims v. GE = if an exposure actually exists.

    Methinks further = Such a PR would prevent another billion shaved off SDRL's market value!

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