Here's What This $3 Billion Money Manager Has Been Buying

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 Todd Asset Management. Based in Kentucky, the money manager has an investing strategy centered around its estimate of price in relation to intrinsic value, stating: "We believe investing in stocks with attractive valuation, improving fundamentals and market acceptance of those characteristics increases the probability of out performance."

The company's reportable stock portfolio totaled $3.4 billion in value as of Dec. 31, 2013.

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 Tata Motors and First Solar. Other new holdings of interest include PotashCorp (NYSE: POT  ) and Kinder Morgan Energy Partners (NYSE: KMP  ) . Fertilizer giant PotashCorp is yielding 4.5%, and its dividend has increased by nearly 1,000% over the past three years. The company has been challenged lately by an oversupply in the market and the breakup of a key Russian cartel (now seemingly repaired). Potash's last quarter wasn't strong (due to "pricing headwinds," among other factors), and while its long-term promise is intact, there are short-term concerns such as falling margins. Demand from China is a plus, though, and some see the stock as having fallen enough to now be attractively priced.

Energy giant Kinder Morgan Energy Partners offers a tempting 6.8% dividend yield and has been steadily growing its distributable cash flows in recent years. Bulls like that it has identified sizable investment opportunities and is investing more in shipping oil by rail. Kinder Morgan's COO recently spoke with The Motley Fool about shifts in the global energy market, and about how investors might view master limited partnerships, or MLPs, such as Kinder Morgan Energy Partners.

Among holdings in which Todd Asset Management increased its stake were drilling specialists Seadrill (NYSE: SDRL  ) and Transocean. Seadrill is a deepwater drilling specialist that has been dominating its realm. Some don't like that it has taken on a lot of debt, but others are reassured by an order backlog that tops $19 billion. Seadrill's third quarter featured revenue rising 17% from year-ago levels to top expectations but earnings falling a little short. Seadrill's fleet is more modern than those of its peers, and it has more rigs under construction than some key rivals, too. That might lead to an oversupply problem if oil companies cut back on expenditures for a while, but long-term demand seems likely, and Seadrill is positioned well for the long run. Seadrill's dividend yields a huge 10.6%, making it another IRA candidate.

Todd Asset Management reduced its stake in many companies, including Philip Morris International (NYSE: PM  ) and Celgene (NASDAQ: CELG  ) . Philip Morris International yields 4.8% and its dividend looks rather secure, thanks to a sizable free cash flow fueled by addicted customers. It has been challenged by many smokers quitting or switching to value brands, and by increased regulations and taxes. Philip Morris International, though, still has many fans who like its international growth prospects, its innovation, its share buybacks, and its embrace of electronic cigarettes, or e-cigs, and heated products. Bears don't like its debt, though. The company reports its fourth quarter on Feb. 6.

Celgene is a biotech company whose stock has averaged annual growth of 31% over the past decade. Contributing to its performance is its successful cancer drug, Revlimid, as well as pancreatic-cancer-treating Abraxane and Pomalyst, targeting multiple myeloma. Celgene's pipeline is also promising, featuring drugs such as apremilast, which fights arthritis, and it has been investing in other companies' promising drugs as well. Celgene's fourth-quarter, revenue jumped 21%, while net income rose by 13%. Lest some investors get carried away, management has tempered near-term expectations.

Finally, Todd Asset Management's biggest closed positions included Ensco and Yum! Brands.

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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  • Report this Comment On February 05, 2014, at 4:13 PM, ronbeasley wrote:

    Do you just make this stuff up? according to their 13F filing, Todd didn't hold any KMP at 12/31 and held a tiny amount (2,500shares) of KMI. The Tata and First Solar positions are so small as to barely be noticeable, about two-tenths of a percent each.

  • Report this Comment On February 06, 2014, at 12:34 PM, TMFSelena wrote:

    I dunno -- at http://whalewisdom.com/filer/veredus-asset-management-llc#ho... I see a modest KMP holding. It's far from major, but I do mention the big new buys and sells. First Solar is not a huge position, true, but it's the second biggest new holding, per that data. Basically, I list some of the main changes and then go into some detail on a handful of interesting companies on the entire list. When these portfolios hold hundreds of positions, most of them are not huge.

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