Here's What This $69 Billion Pension Fund 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 the California Public Employees Retirement System (often referred to as CalPERS), one of the biggest and most prominent pension funds. It serves more than 1.6 million public employees, retirees, and their families.

CalPERS' reportable stock portfolio totaled $69 billion in value as of Dec. 31, 2013. Fifty-five percent of its investment portfolio was recently in public equity, with 11% in private equity, 15% in income investments, and 9% in real estate, among other categories.

Interesting developments
So, what does CalPERS's latest quarterly 13F filing tell us? Here are a few interesting details.

The biggest new holdings are Vodafone Group and America Movil, S.A.B. de C.V.A. Other new holdings of interest include Alcatel-Lucent (NYSE: ALU  ) and VALE S.A. (NYSE: VALE  ) . Alcatel-Lucent has seen its shares soar some 171% over the past year, as it has been successfully turning itself around and is again seen as a worthy competitor in telecom equipment. Alcatel-Lucent carries a lot of debt, but it's addressing that in part by selling off its troubled enterprise business and other assets. Its fourth quarter showed a company back in the black after some tough years.

Brazilian mining giant Vale has been cutting costs aggressively, reducing its investments and selling assets while focusing its explorations in Peru, Canada, Australia, and Brazil. It has been concentrating on its most promising opportunities, too, such as iron, and its third quarter featured strong production growth. Analyst Carlos De Alba at Morgan Stanley recently upgraded Vale's stock from "equal weight" to "overweight," seeing its risk-reward trade-off as appealing. That's understandable, as Vale features a forward P/E ratio below seven, making its stock rather attractive.

Among holdings in which CalPERS increased its stake was The ExOne Company (NASDAQ: XONE  ) . There has been much hype and expectation surrounding 3-D printing companies, but some of that shine has worn off amid earnings warnings. ExOne itself recently tempered expectations, and got whacked in return. (Notably, management explained that timing was to blame, as some orders are being delayed.) Bulls still find a lot to like, such as ExOne's growing service centers.

CalPERS reduced its stake in lots of companies, including Rite Aid Corporation (NYSE: RAD  ) and KCAP Financial  (NASDAQ: KCAP  ) . 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. It might seem Rite Aid has no upside left after its strong run, but it actually seems cheaper than its key rivals. Bears would also remind us that Rite Aid carries a lot of debt. Its performance has been improving, but it still faces powerful competition.

KCAP Financial, a private-equity and venture capital firm that specializes in buyouts and debt investments, has had a bumpy year, seeing its stock plunge in mid-2013 on disappointing second-quarter earnings, but more recently reporting growing assets under management and rising fees. Bulls love its double-digit dividend and see the stock as undervalued. In a conference call, management reiterated its focus "on continued balance sheet growth, increasing net investment income and dividend distributions."

Finally, CalPERS's biggest closed positions included Dell and NYSE Euronext.

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 14, 2014, at 6:48 PM, corpgov wrote:

    Another thing to try to figure out with CalPERS is when are then investing (or divesting) just as because of rebalancing to indexes and when have they actually done some stock picking.

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