Here's What One of the Richest Americans Has Been Buying

It can pay off to keep an eye on the big guys.

Jan 16, 2014 at 4:45PM

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 Fisher Asset Management, founded in 1979 by Ken Fisher. It manages money for more than 100 large institutions, and its strategy involves macroeconomic research and fundamental analysis. You may know Fisher by his longtime column in Forbes magazine, where he's also No. 243 in the magazine's list of the 400 richest Americans, with a net worth of $2.3 billion. You may know his father as well: Phil Fisher wrote the seminal investing text Common Stocks, Uncommon Profits.

The company's reportable stock portfolio totaled $43.6 billion in value as of Dec. 31, 2013.

Interesting developments
So what does Fisher Asset Management's latest quarterly 13F filing tell us? Here are a few interesting details:

The biggest new holdings are Lloyds Banking Group and the Vanguard REIT Index ETF. Other new holdings of interest include Arena Pharmaceuticals (NASDAQ:ARNA) and 3D Systems (NYSE:DDD). Arena Pharmaceuticals has had investors hopeful about its obesity drug, Belviq. It has competition, though, and hasn't been experiencing huge sales. It might just take some time for Belviq to gain traction, but it has a better safety profile than some rivals, which bodes well for it. Competition is growing, but then so is the size of the pie that's being divided.

3D Systems' stock has been soaring lately, on great expectations and visions of a "third industrial revolution." The company is seen by some as overhyped and overvalued (in a richly valued crowd). It holds a lot of promise, though, and has been busy making acquisitions -- such as a strategic chunk of Xerox. 3D Systems posted big growth numbers in its third quarter, but also tempered near-term expectations. The stock had been heavily shorted, but its doubters are losing their conviction. Interested investors should take a long-term view.

Among holdings in which Fisher Asset Management increased its stake was Pengrowth Energy (NYSE:PGH). Canada-based Pengrowth, an oil and gas drilling and exploration company, offers a tantalizing dividend yield of 7.4%. (Note, though, that its payout has been shrinking in recent years.) It has been challenged lately by rising costs and has cut back on its production. It sold some noncore assets to generate funds needed for its high-potential Lindbergh bitumen project and other needs, and it has built a promising position in thermal oil, with Lindberg results so far exceeding expectations. The Lindbergh project is expected to contribute cash flow beginning in 2015. Meanwhile, Pengrowth Energy's significant natural gas operations are poised to benefit from rising natural-gas prices. The stock has a lot of potential, but understand that further dividend cuts might happen, too.

Fisher Asset Management reduced its stake in lots of companies, including Rite Aid (NYSE:RAD). Rite Aid has been executing an impressive turnaround. It has profited from many high-margin generic drugs, but is now facing more intense competition as rivals discount more. All the drugstores can benefit from Obamacare delivering new customers, and flu shots have been a shot in the arm, too. It might seem that Rite Aid has no upside left after its strong run, but it actually seems cheaper than its key rivals. Its third-quarter report was mixed, featuring estimate-topping earnings and revenue up 2%, but management tempering near-term expectations. Bears would also remind us that Rite Aid still carries a lot of debt -- and CVS Caremark's new Family Vitamin Center is also a threat.

Finally, Fisher Asset Management's biggest closed positions included AmBev and Cytec. Other closed positions of interest include Annaly Capital Management (NYSE:NLY). Annaly, a mortgage REIT, has seen its stock drop more than 20% over the past year, helping push its dividend yield close to 12%. Note that its dividend has been shrinking, though, and along with its peers, it's vulnerable to rising interest rates. A "sell" rating from Goldman Sachs is also unwelcome. Annaly Capital Management is moving more into commercial real estate, and in its last earnings report, management tempered expectations due to a shaky environment. Many are critical of Annaly's management structure and compensation.

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. 13F forms can be great places to find intriguing candidates for our portfolios.

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Longtime Fool contributor Selena Maranjianwhom you can follow on Twitter, owns shares of Lloyds TSB Group. The Motley Fool recommends Goldman Sachs. It recommends and owns shares of 3D Systems and has the following options: short January 2014 $20 puts on 3D Systems. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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