This Hedge Fund Owns a Town. What Else Has It Bought Lately?

It can pay off to keep an eye on the big investors out there.

Apr 17, 2014 at 5:15PM

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 Marathon Asset Management. Founded in 1998, it's a significant hedge fund company with a reportable stock portfolio totaling $3.9 billion in value as of March 31, 2014. Its specialty is distressed and situational investing in the global credit and fixed-income markets, and the company often appears on lists of top-performing hedge funds.

The most interesting thing about Marathon these days, though, is this: Almost by accident, it has found itself the owner of a company town called Scotia in California. It was a major creditor of a timber company that used to own the town, and a bankruptcy court awarded the entire town to Marathon.

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

The biggest new holdings are Canadian Natural Resources Ltd. and Alleghany Corporation. Other new holdings of interest include National Oilwell Varco (NYSE:NOV), a powerhouse in the energy industry. Yielding 1.3%, it supplies oil and gas companies with nearly everything they need throughout the exploration and production processes, and as the cost of extracting oil has grown, National Oilwell Varco has benefited. It has faced some enviable problems lately -- namely, trying to meet demand and deal with a huge and growing capital-equipment order backlog, recently topping 16%. The company is spinning off its lower-margin oil-field production equipment distribution business in order to focus on higher-margin work.

Among holdings in which Marathon Asset Management increased its stake were Petroleo Brasileiro S.A. (NYSE:PBR) and Oracle Corporation (NYSE:ORCL). Petrobras, Brazil's oil giant (majority-owned by the Brazilian government, in fact), has been burdened by significant debt and has even added to its obligations in order to fund more offshore development. Petrobras has also had to deal with governmental meddling in its business, such as when gas prices were kept below its costs. The company recently had some good news, when a deepwater well began producing oil. With a forward P/E ratio near 6.4, the stock looks intriguing.

Data management software giant Oracle yields about 1.2% after some aggressive dividend increases. Its free cash flow tops $14 billion annually, and it has been using some of that for acquisitions, such as online marketing specialist Responsys and cloud-computing player Corente. The company's profit margins have been growing, too. Oracle is facing significant competition from other tech titans as well as relative upstarts, but it's still performing well. In 2013, Oracle overtook International Business Machines as the world's second-largest software company. Oracle's forward P/E ratio of 12.2 has the stock looking appealing.

Marathon Asset Management reduced its stake in lots of companies, including Intel Corporation (NASDAQ:INTC) and 3M Co. (NYSE:MMM). Intel offers a solid 3.4% dividend yield. It recently got the boot from Samsung tablets and has lost some 64-bit ground to competitors, but all is not lost. The company recently reported its first-quarter results, with earnings down but still topping expectations, and management pointing to a 5 million tablet processors shipped. The results also reflect a still-weak PC market, with Intel's PC unit shipments up just 1% and prices dropping by 3%. Bulls have high hopes for its Broxton chip that serves both tablets and phones, and enterprise server platform.

3M offers a 2.6% yield and a recent 35% dividend hike. It has also been rewarding shareholders via share buybacks, planning to spend $12 billion on them. Bulls like its research and development investments and innovation, while bears worry about rising raw-materials costs and increasing competition, especially in emerging markets. Its stock doesn't seem bargain-priced, but it's likely to do well in the long run and offers a rather reliable dividend. 3M recently closed on its acquisition of Treo Solutions, which analyzes data for health-care providers and insurers.

Finally, Marathon's biggest closed positions included Gartner and Estee Lauder Companies.

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 specialist Selena Maranjian whom you can follow on Twitterowns shares of 3M and Intel. The Motley Fool recommends 3M, Gartner, Intel, National Oilwell Varco, and Petroleo Brasileiro S.A. (ADR). It owns shares of Intel, International Business Machines, National Oilwell Varco, and Oracle. 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.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't 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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