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 Farallon Capital Management, founded by Thomas Steyer in 1986, and employing a bottom-up fundamental investing strategy.
The company's reportable stock portfolio totaled $5.2 billion in value as of June 30.
So what does Farallon's latest quarterly 13F filing tell us? Here are a few interesting details.
The biggest new holdings are Charter Communications and Smithfield Foods. Other new holdings of interest include Chimera Investment (NYSE: CIM). Chimera Investment sports a fat yield of 12%, but its payout has been shrinking and may continue to do so. It has taken on more risk than many of its brethren, and has had some trouble filing reports on time. With its stock in penny-stock territory, it just received an extension to continue its listing on the New York Stock Exchange. Some have questioned its hefty management fees. Chimera may become less attractive if interest rates rise, or if Congress cancels favorable tax treatment for REITs. Its third quarter featured a slip in book value.
Among holdings in which Farallon Capital Management increased its stake were Freeport McMoRan Copper & Gold (NYSE: FCX) and Anacor Pharmaceuticals (NASDAQ: ANAC). Freeport McMoRan Copper & Gold, the world's largest publicly traded copper producer, offers a sizable 4.1% dividend yield. It has been hurt by falling copper and gold prices, though its second quarter was encouraging, featuring estimate-topping earnings (and revenue a bit below expectations), along with cost cutting. The company newly purchased pair of oil-and-gas-producing companies has helped its performance lately. Freeport's stock has been avoided by some, while others see it as undervalued, with its forward P/E ratio of 10. A promising development is Indonesia's possible lifting of restrictions on exports of ore.
Anacor has seen its stock surge more than 60% this year, in part on hopefulness over its onychomycosis drug tavaborole. Investors were delighted to see the CFO buying 50,000 shares recently, in a clear vote of confidence (after a 43,000-share buy in June). The company has other drugs in its pipeline, too, tackling conditions such as atopic dermatitis and psoriasis. These offer further growth potential if they eventually win FDA approval.
Farallon Capital Management reduced its stake in companies such as Kinder Morgan (NYSE: KMI), a pipeline giant with a dividend yield of 4.2%. The company's reputation hasn't been helped by several leaks, but its last quarter was solid, in part because of the diversification of its businesses. Kinder Morgan is looking to expand its capacity and capitalize on the boom in oil sands production, but some worry that it might be growing too aggressively and might not be able to sustain its dividend.
Finally, Farallon's biggest closed positions included Virgin Media and American Express. Other closed positions of interest include Dynavax Technologies (NASDAQ: DVAX). Dynavax shares surged in late July when its second quarter featured a smaller-than-expected loss. The company's Hepatitis B drug, Heplisav, has faced challenges from the FDA and delays. The company is also working on a treatment for asthma.
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, and 13-F forms can be great places to find intriguing candidates for our portfolios.
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