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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 Westfield Capital Management, an investment advisor serving institutions and wealthy investors. It employs deep fundamental research as it seeks out stocks that are underloved by the market, and its funds have outperformed their benchmarks, on average, since inception.
The company's reportable stock portfolio totaled $14.5 billion in value as of June 30, 2013.
So what does Westfield's latest quarterly 13F filing tell us? Here are a few interesting details.
The biggest new holdings are railroad company CSX and homebuilder Lennar. Other new holdings of interest include Keryx Biopharmaceuticals (NASDAQ: KERX ) , which has more than tripled over the past year and is near a 52-week high. Many expect FDA approval for its Zerenex drug, which treats kidney disease. The company is looking to expand the drug's applications and approvals, too. Keryx has potential, but so far it also has paltry revenue while it burns cash, and it doesn't have a pipeline rich with many promising drugs. Fortunately, it does have ample cash, which should support its drive toward approvals and eventual profits. If Zerenex gains New Chemical Entity status, that will also help it, competitively.
Among holdings in which Westfield Capital increased its stake was oil and gas equipment and services company McDermott International (NYSE: MDR ) , which is down more than 40% over the past year, in part due to posting weak second-quarter results and receiving several analyst downgrades. Its CEO explained, "As a management team, we are taking immediate and decisive actions to correct the weakness we have experienced in our project bidding and execution..." He added, "We are driving a more disciplined culture within the Company," and warned that, "problematic projects are expected to require some time to fully work through the system." Still, the company does have an order backlog of $5.1 billion and if it improves its contracting and project management processes, it might represent a nice value. Analysts expect it to grow by about 18% annually over the next few years.
Westfield Capital reduced its stake in lots of companies, including American Capital Agency (NASDAQ: AGNC ) , a mortgage REIT with a tantalizing dividend yield recently near 14% -- though that reflects a 16% dividend cut earlier this year and a fresh 24% cut. On the bright side, the company has been aggressively buying back stock. It has also been moving more into 15-year mortgages and decreasing its focus on 30-year ones. The shorter loans are less volatile, but they also offer lower yields. American Capital's CEO is well respected, but some worry about rising interest rates and the easing of quantitative easing. The Fed put off tapering its easing, but that won't last forever.
Finally, Westfield's biggest closed positions included IDEX and Broadcom (NASDAQ: BRCM ) . Other closed positions of interest include Cirrus Logic (NASDAQ: CRUS ) . Communications chipmaker Broadcom is down more than 20% over the past year, but offers patient believers a 1.6% dividend yield. Broadcom's presence in the new iPhones bodes well for its bottom line, and a recent acquisition might prove to be a game-changer for it, too. The company has been upgraded by several analysts recently, and sports a forward P/E near 11, suggesting that it's far from overvalued.
Audio-chip maker Cirrus Logic tumbled after reporting disappointing quarterly results and guidance. Bears worry about its reliance on Apple, which accounted for more than three-quarters of revenue in its last fiscal year, though Cirrus has been lining up other customers. They also fear that lower-priced iPhones could hurt Cirrus and think its growth is due to slow. Bulls have seen its problems as short-term, though. Analysts expect Cirrus to grow by more than 18% annually over the next five years, its free cash flow is growing, and its forward P/E is just 10, suggesting more room to grow.
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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