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 (NOV 0.16%), 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. (PBR -0.70%) and Oracle Corporation (ORCL -2.25%). 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 (INTC -1.79%) and 3M Co. (MMM 0.57%). 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.
