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Here's What This Big Market Beater Has Been Buying and Selling

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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 investment advisory firm Douglass Winthrop Advisors. It's of interest because it employs a Foolish "low-turnover, buy-and-hold strategy ," which has served it well. Since its inception roughly a decade ago, its equities investments have averaged annual gains of 8.3%, vs. 7.1% 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 $750 million in value as of Dec. 31, 2012.

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

The biggest new holdings include Mueller Water and Allergan. Other new holdings of interest include Walter Energy (NASDAQOTH: WLTGQ  ) . Walter is a pure play in metallurgical coal, which is needed by the steel industry, among other things. Along with other coal companies, it got a boost from China's plans for development and growth. Some wonder whether the company will be bought out. After taking a $1.1 billion acquisition-related charge last year, the company's near-term prospects look a bit murky. Coal consumption in the U.S. isn't expected to surge, but developing economies are much more promising.

Among holdings in which Douglass Winthrop increased its stake was Enterprise Products Partners L. P. (NYSE: EPD  ) , one of the largest master limited partnerships and a specialist in midstream oil and gas operations. It recently sold out capacity at a new propane dehydrogenation facility, and aims to build more. It's also working on paying down debt, but that hasn't kept it from upping its dividend over many years. It had a good year in 2012.

Douglass Winthrop reduced its stake in lots of companies, including Altria (NYSE: MO  ) and Devon Energy (NYSE: DVN  ) . To many people, the future for domestic tobacco giant Altria doesn't look as rosy as its past, due to a shrinking smoker base in the U.S., coupled with more folks moving to discount cigarettes and rising taxes and regulations. Respected analysts at Steifel Nicolaus recently rated the stock a buy, but my colleague Rich Smith thinks they're wrong. Altria sports a dividend yield of 5.1%.

Devon Energy is an integrated energy concern, involved in exploration, production, and midstream operations. My colleague Joel South sees Devon as one of the best values in among its peers, with a strong balance sheet, to boot. Bears worry, though, about some transportation problems it has had and about possible margin pressure due to changes in gas prices. Its 1.5% dividend yield isn't the most enticing, either.

Finally, Douglass Winthrop's biggest closed positions were two exchange-traded funds, focusing on the Russell 2000 index and the Russell mid-cap growth index. Other closed positions of interest included Ford (NYSE: F  ) , which has been successfully restructuring in order to boost profitability. It has been posting solid results, but the auto industry does offer some tough competition. My colleague Daniel Miller has pointed out that Ford's debt load isn't as bad as it appears.

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.


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