Studying 13F filings can shine a bright light on smart stock picks.
Today let's look at Todd Asset Management, which held a reportable stock portfolio totaling $3.3 billion in value as of Sept. 30, 2013. Based in Kentucky, the money manager has an investing philosophy centered on its estimate of price in relation to intrinsic value, and it further says: "We believe investing in stocks with attractive valuation, improving fundamentals and market acceptance of those characteristics increases the probability of out performance."
Interesting developments
So what does Todd Asset Management's latest quarterly 13F filing tell us? Here are a few interesting details.
The biggest new holdings are Delphi Automotive and United Rentals. Other new holdings of interest include SodaStream International (SODA) and SouFun Holdings (SFUN). SodaStream fans like its increasing number of licensing agreements and its razor-and-blades business model, where consumers have to keep buying refill cartridges. It has plenty of naysayers, some of whom worry about competition from Starbucks, which is launching its own beverage-making machines, branded Fizzio -- though that will target the corporate market more than SodaStream's consumers. With the fast-growing company sporting a forward P/E ratio of just more than 17, some see the stock as rather appealing. SodaStream has also been viewed as an attractive acquisition target for a beverage company.
SouFun, a China-based online real-estate company, offers content and a marketplace for home furnishings, too. It's growing rapidly, is profitable, and offers a dividend, too, yielding 3.5%. Given its growth rate, the stock seems attractive with its P/E ratio in the 20s. On the other hand, some are worrying about a real-estate bubble in China, SouFun's marketing business hasn't been growing briskly, and China itself is a concern, with its slowing growth rate and its political, economic, and regulatory risks.
Among holdings in which Todd Asset Management increased its stake was Transocean (RIG 1.90%), an offshore drilling-rig owner and specialist in ultra-deepwater drilling. In fact, the company has been selling off some assets and focusing on tough drilling challenges that offer greater profitability. It has recently been charging high dayrates, boosting its top line, and signing lucrative contracts, such as a $1.1 billion deal with Chevron. Its order backlog has topped $27 billion. It offers a hefty 4.9% dividend yield, too.
Todd Asset Management reduced its stake in lots of companies, including oil refiner Marathon Petroleum (MPC -0.56%), which was spun off from Marathon Oil. Some are avoiding refiners as their profit margins have been pressured lately by volatile oil prices, but bulls like Marathon's focus on shareholders, as it sold assets and interests, generating cash for sizable stock buybacks and upping its dividend by 20% -- it now yields 2.4%. Marathon Petroleum is also positioned to profit from growing demand from China and even from the U.S., as our domestic oil operations grow.
Finally, Todd Asset Management's biggest closed positions included Broadcom and Eaton. Other closed positions of interest include fertilizer giant PotashCorp (POT). Fertilizer giant Potash is vulnerable to fertilizer prices and the state of developing economies. Along with its peers, it has been challenged by an oversupply in the market and by the breakup of a key Russian cartel. But that's not a long-term issue, and Potash remains attractive, given our growing global need for food. Bulls like PotashCorp's low-cost structure and solid profit margins. New competition may come from BHP Billiton, which is building a potash mine in Canada. PotashCorp carries significant debt, but it's also generating more than a billion dollars in free cash flow annually. It recently yielded 4.4%, and its dividend has been hiked 25% this year and some 700% over the past few years.
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.
