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 Robeco Investment Management, which, until recently, was a U.S.-focused subsidiary of major Netherlands-based financial institution, Rabobank, and which had three primary divisions: Boston Partners (value equity), Sage Capital (multi-manager strategies), and Weiss, Peck & Greer (fixed income, equity and alternatives). Earlier this year, though, Rabobank sold Robeco to Japan-based ORIX Corp.
Robeco Investment Management touts its flat management structure and focus on value equity investing. The company's reportable stock portfolio totaled $41.5 billion in value as of September 30, 2013.
Interesting developments
So what does Robeco's latest quarterly 13F filing tell us? Here are a few interesting details:
The biggest new holdings are Allstate and Siemens AG. Other new holdings of interest include Rite Aid (RAD 24.00%) and Corning (GLW -0.03%). Rite Aid's stock has more than tripled over the past year, as the company executes a turnaround. It's focusing more on wellness and customer loyalty and, like other health care-related companies, it's poised to benefit from Obamacare delivering many newly insured customers. It might seem that the stock has no upside left after its strong run, but it actually seemed cheaper than its key rivals last month, and that was before the stock took a hit due to a mixed third-quarter report. That report featured estimate-topping earnings and revenue up 2%, but management tempered near-term expectations. Bears would also remind us that Rite Aid still carries a lot of debt.
Corning's stock has surged more than 40% over the past year, and its dividend, which yields 2.3%, has doubled in less than three years. Bulls are very excited about a big partnership with Samsung, and see much potential in Corning. Its Gorilla Glass is installed in more than a billion mobile devices across some 500 product lines, and its curved glass could prove useful to the solar energy industry, among others. Corning has been buying back billions of dollars' worth of shares, too.
Among holdings in which Robeco Investment Management increased its stake were Odyssey Marine Exploration (OMEX -1.38%) and Two Harbors Investment (TWO -0.72%). Odyssey Marine Exploration is down by more than 25% over the past year, and its stock is sitting firmly in penny-stock territory. The company is in the intriguing business of searching for and recovering deep-sea shipwrecks (and their often valuable cargo). It has many doubters, as more than 20% of shares outstanding have been shorted. The company has been posting a string of losses and negative free cash flow. Odyssey Marine's third-quarter results featured revenue up sharply due to 61 tons of silver recovered from the three-mile-deep SS Gairsoppa. Management added that, "Our current commodity target list represents more than $800 million in total potential recovery value." It's good to remember, though, that this is a speculative kind of investment, facing high exploration costs, international regulations, and discoveries that are not guaranteed.
Two Harbors is a mortgage REIT, or "mREIT," and one regarded highly by our analysts for its flexible investment approach and effective management. It offers shareholders a fat 10.9% dividend yield, but note that its payouts don't get the lower tax rates of other dividends. Two Harbors Investment is a "hybrid" mREIT, investing in both government agency-backed mortgages, and ones that are not so backed. Still, rising interest rates (and mortgage prepayments) have hurt mREITs, though Two Harbors has fallen less than its key peers over the past year, in part due to its hedging – such as its purchase of mortgage servicing rights (MSRs) from Flagstar Bancorp.
Robeco Investment Management reduced its stake in lots of companies, including Towers Watson and K12.
Finally, Robeco's biggest closed positions included Mattel and Vornado Realty Trust. Other closed positions of interest include Tower Group International (NASDAQ: TWGP). Tower Group International is a small insurance company -- but it hasn't always been so small, though, as its stock is down some 80% over the past year, and has averaged 31% annual losses over the past five years. It's in penny-stock territory, recently at risk of being delisted from the Nasdaq market. It also has had to restate several years' worth of earnings, which has unsettled some investors, and a restructuring has lowered its ultimate profit potential. If that's not enough, Tower Group recently reported a reserve shortfall, which is worrisome for an insurer. With its last quarter topping expectations, and the company lowering its costs via a major 10% downsizing, some are hopeful. But caution is definitely warranted here.
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. Therefore, 13F forms can be great places to find intriguing candidates for our portfolios.
