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Invest Like a Pro

Imitation is the sincerest form of flattery, right? Well, when you're learning a new skill, imitation can also be a great way to hone your craft.

If you're learning guitar, you might pick up a book of Jimi Hendrix's licks or download the chords to a couple of Bob Dylan's songs. And when you're trying to become a better investor, it only makes sense to take a peek at what the professional investors are up to.

For the Fools who don't have the time or inclination to pick individual stocks on their own, the team at the Fool's Champion Funds newsletter service has put together a buffet of mutual funds that have collectively outperformed their benchmarks by more than 16%. For the rest of us, we can tune in directly to what some of the major funds are holding.

You see, the SEC requires institutional investment managers who manage $100 million or more to show their cards via quarterly 13-F filings. This week, I'm looking at one of the holdings of former Wilshire Associates subsidiary Los Angeles Capital Management. I've dug in to see what kind of moves LACM has been making, and to make things even more interesting, I cross-referenced its stocks against the opinions of The Fool's CAPS community.

Below are three stocks that LACM bought more of between its March filing and June filing ...


Percentage Change in LACM's Position

Current Market Value of LACM's Position

CAPS Rating (Out of 5)

Northrop Grumman (NYSE: NOC  )


$29.1 million


Loews (NYSE: LTR  )


$11.5 million


WESCO International (NYSE: WCC  )


$12.5 million


Sources: Capital IQ (a division of Standard & Poor's), Yahoo! Finance, and CAPS as of Oct. 30.

... and three of the ones on which the firm lightened its position.


Percentage Change in LACM's Position

Current Market Value of LACM's Position

CAPS Rating (Out of 5)

Burlington Northern Santa Fe (NYSE: BNI  )


$0.7 million




$0.8 million


Union Pacific (NYSE: UNP  )


$0.5 million


Sources: Capital IQ, Yahoo! Finance, and CAPS as of Oct. 30.

Now, before you jump to it and make any hasty moves, remember that we're looking at what LACM has done in retrospect. For all we know, since the last 13-F filing, the firm has drastically changed its holdings in any or all of the above stocks. With that in mind, here are some further thoughts on LACM's railroad sales.

Not so loco for railroads
LACM has had a position in these three railroads going back to around the time it started as a stand-alone entity in 2002. It's been an on-again, off-again relationship, with the most recent buying spree in late 2005 and early 2006.

So why sell now? It could be that LACM thinks that expectations have gotten ahead of reality and the stocks are too high right now. CSX's stock, for example, more than doubled between the beginning of the fourth quarter in 2005 and the end of the second quarter of this year. Currently, it's down from its high this year, but it's still trading at 17.6 times 2007 earnings projections. Some might consider that expensive for a railroad stock.

On the flip side, players on CAPS continue to be positive on the group. Weighing in on CSX, CAPS player TheGouch23 recently said:

Rail transport [is] making a comeback. CSX continues to improve operational efficiency and minimize downtime. Intermodal transport is huge as well. Strong unchallengeable regional supremacy as a railroad looks good for the business ... strong earnings bode well for the immediate future.

And of course let's not forget that although Berkshire Hathaway's Warren Buffett recently cut back on his positions in Union Pacific and Norfolk Southern (NYSE: NSC  ) , he continues to be bullish on his position in Burlington Northern.

So who's right here: Did LACM sell at the right time? Or is there still more ahead for the railroad stocks? Hop on over to CAPS and start interacting with the 72,000-plus CAPS players already there. While you're weighing in on these stocks, you can also read up on more than 5,000 other stocks that are currently rated on CAPS.

More CAPS Foolishness:

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2/12/2010 4:01 PM
BNI.DL $100.21 Down +0.00 +0.00%
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CSX $30.29 Down -0.05 -0.16%
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