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

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 (who stepped down in 2011). The investment company is known for relatively few years with negative returns, and for average annual gains of about 20% since its inception several decades ago. That's a powerful record. It hasn't done as well recently, though, gaining just 1% in 2011, 2% in 2012, and 16% in the first half of 2013.

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 had long charged 3% and 30%, though that was reduced some in 2012.

The company's reportable stock portfolio totaled $2.0 billion in value as of June 30, 2013.

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

The biggest new holdings are puts on the iShares Russell 2000 ETF and calls on Ford stock. Other new holdings of interest include New York Community Bancorp (NYSE: NYCB  ) and 3D Systems (NYSE: DDD  ) . New York Community Bancorp, known for prudent management of credit risk, has grown by an annual average of 28% since its IPO in 1993. That's kind of impressive! It has been buying other banks and expanding its commercial and industrial lending business. The bank's second quarter featured estimate-topping earnings and a rising net interest margin. Some see the bank's sizable multifamily loan portfolio as an ace in the hole, offering refinancing-related income. For patient investors with conviction, the stock offers a whopping 6.9% dividend yield.

3-D printing is still in its infancy, with much promise, and 3D Systems is well positioned within the industry and investing in further growth. For example, it recently bought The Sugar Lab, which is developing printable food. Despite significant short interest, the company recently received an upgrade from Citigroup analyst Kenneth Wong, and it has been innovating and releasing new products. Some see the stock as overvalued now, but others just see lots of room to grow.

Among holdings in which Caxton Associates increased its stake was power management company Eaton (NYSE: ETN  ) . It posted revenue up 40% in its last quarter, but earnings per share dropped, in part due to dilution caused by its issuing more shares. Its $12 billion acquisition of Cooper Industries has been boosting its competitive position and giving it some tax advantages. Eaton upped its dividend by 11% earlier this year; it yields 2.6% now. Some worry about innovators eating Eaton's lunch and see the stock as no bargain at recent levels, while others are bullish about its growth prospects once global economies heat up more.

Caxton Associates reduced its stake in lots of companies, including regional banks Synovus Financial (NYSE: SNV  ) and Regions Financial (NYSE: RF  ) . Georgia-based Synovus recently repaid its $968 million TARP debt, in part by issuing more stock. Its credit quality has been improving, and it has been posting strong return-on-equity (ROE) numbers. It just reported its fourth profitable quarter in a row, too. Analysts at Zacks upgraded it in July to a strong buy, noting, "A decline in non-interest expense, improvement in credit quality and strong capital ratios depict the scope of sustainable profitability in the forthcoming quarters." Analysts at Drexel Hamilton downgraded the stock in August, though, on valuation concerns. The stock yields 1.2%.

Regions Financial, based in Alabama, posted second-quarter results that were solid but not exciting. Management pointed to increases in its loan balances outstanding, customer base, and core checking accounts, along with reduced future funding costs and an improved debt and capital structure. Its improved performance in Federal Reserve stress tests and its ambition to profit off mobile banking have encouraged investors, but some still see the company, overall, stuck in neutral. Regions tripled its dividend in April.

Finally, Caxton Associates' biggest closed positions included calls on both Anadarko Petroleum and General Motors. Other closed positions of interest include Freeport McMoRan Copper & Gold, the world's largest publicly traded copper producer, which has been challenged by falling copper and gold prices. Its second quarter was encouraging, featuring estimate-topping earnings (and revenue a bit below expectations), along with effective cost-cutting. While some wait for better days, other see Freeport's stock as undervalued.

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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  • Report this Comment On September 17, 2013, at 11:33 AM, analyze224 wrote:

    Yes, but as per Yahoo Finance, it looks as though the institutional activity on a net basis is negative... ie more selling than buying.

    The same appears to be true of company management, as a group, more selling than buying.

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