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 Thornburg Investment Management, which was founded in 1982 and is based far from Wall Street in Santa Fe, New Mexico. It manages seven equity funds, nine bond funds, and separate portfolios belonging to select institutions and individuals. Morningstar has praised the company's performance, its managers, and the fact that they eat their own cooking. (It does note that costs could be lower.)
The company's reportable stock portfolio totaled $21.9 billion in value as of June 30, 2013.
So what does Thornburg's latest quarterly 13F filing tell us? Here are a few interesting details.
The biggest new holdings are cable company Liberty Global and nuclear power giant Exelon. Other new holdings of interest include networking and security specialist Palo Alto Networks (NYSE: PANW ) , which has been growing rapidly, recently posting a 55% year-over-year gain in revenue, for example. Some have speculated that one of its much bigger rivals might just buy the company. It seems richly valued, but some are tantalized, while others would like to see actual profits in addition to revenue growth. Management has pointed to some competitive victories, such as replacing Cisco Systems "as the data center firewall of one of the largest insurance companies in North America."
Among holdings in which Thornburg Investment Management increased its stake were Zoetis (NYSE: ZTS ) and Southern Copper (NYSE: SCCO ) . Zoetis was spun off by Pfizer and is the world's largest animal health company. Its 0.8% dividend isn't too hefty, but with a low payout ratio, it has plenty of room to grow. The company is growing abroad, recently winning approval to offer a vaccine for swine there, for example. Animal health is a huge market, and Zoetis a major player.
Southern Copper has been hurt by falling copper prices and a slowdown in China, but many see those as temporary problems, not serious long-term ones. The company has been taking on a lot more debt as it invests in infrastructure. It's largely owned by Grupo Mexico, and enjoys low production costs and higher profit margins than some rivals. The stock recently yielded 1.7%.
Thornburg Investment Management reduced its stake in lots of companies, including Gilead Sciences (NASDAQ: GILD ) and Philip Morris International (NYSE: PM ) . Gilead Sciences has investors hopeful about its oral Hepatitis-C drug, sofosbuvir, which has cleared four phase-3 trials and received priority-review designation from the FDA. The company is also well known for its success with HIV drugs and is tackling Non-Hodgkins Lymphoma, among other things. The stock may not look like a bargain, with a P/E ratio in the 30s, but its five-year projected earnings growth rate tops 25%. It's up more than 80% over the past year and has averaged 28% annual growth over the past 20 years, leading some to wonder whether it's time to sell.
Philip Morris International focuses on tobacco sales outside the U.S., where the growth potential is higher and regulations and restrictions often lower. Still, despite its market dominance, it faces shrinking volumes. (The company sports seven of the top 15 cigarette brands in the world, including Marlboro.) It's being hurt by a strong dollar, but should eventually get a boost from a recovering Europe. And though its growth has slowed some, its prospects remain solid, as developing markets develop and produce bigger middle classes able to afford lots of cigarettes. Still, bears won't like its EPS drop of 4.4% in its last quarter, with revenue sliding 2.5%. The stock yields 4.2%, which reflects a recent 11% dividend hike. The company is buying back lots of shares, too.
Finally, Thornburg's biggest closed positions included health care products maker Covidien and Check Point Software Technologies.
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 13F forms can be great places to find intriguing candidates for our portfolios.
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