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At The Motley Fool, we understand that it often pays to zig when the rest of Wall Street zags. Like us, hedge funds rarely move in lockstep with the broader market. By tracking these little-followed funds' buy and sell decisions, we can often gain valuable insights into opportunities the market might be missing.
Every quarter, any fund managers overseeing more than $100 million must publicly disclose their quarter-end holdings in the Securities and Exchange Commission's Form 13-F. It lists all U.S.-traded securities the fund's manager held at the end of the quarter. Although the form doesn't disclose short positions or intraquarter trades, it can illuminate long stock bets.
To better decipher this 13-F data, we turned to Motley Fool partner AlphaClone, a research and investment-management firm that develops investment strategies based on hedge funds' public disclosures.
Meet Brave Warrior Capital
Glenn Greenberg founded Brave Warrior Capital in 1984. The total market value of Brave Warrior Capital's disclosed equity holdings as of March 31 -- the latest quarter for which data is available -- was $1.17 billion across 13 holdings.
Why should you care? Because according to AlphaClone's back-test simulation, if you'd invested in Brave Warrior's 20 top holdings as they were disclosed publicly each quarter, you would have earned a total return of 266.8% between January 2000 and now, versus just 15.9% for the S&P 500.
The fund's 10 largest positions (by value) and associated changes as of March 31 were:
- Fiserv (Nasdaq: FISV ) -- reduced 1.5%
- Valeant Pharmaceuticals (NYSE: VRX ) -- new
- Mastercard (NYSE: MA ) -- increased 12.6%
- Comcast (Nasdaq: CMCSK ) -- reduced 34.9%
- LabCorp (NYSE: LH ) -- reduced 15.4%
- Ryanair Holdings (Nasdaq: RYAAY ) -- reduced 9.9%
- Aon (NYSE: AON ) -- new
- Arch Capital Group (Nasdaq: ACGL ) -- increased 2.8%
- U.S. Bancorp (NYSE: USB ) -- reduced 23.6%
- Google (Nasdaq: GOOG ) -- reduced 26.3%
Outside the top 10 holdings:
- Falling Positions: The fund reduced its exposure to Broadridge Financial Solutions.
- Eliminated Positions: During the quarter, the fund sold out of Lockheed Martin.
Selected Q1 2011 commentary
Brave Warrior Capital has a diversified portfolio, with financial and technology stocks making up almost two-thirds of the total portfolio. Here's where the firm is winning and losing, and making new bets, at the moment.
- Current winner: Valeant Pharmaceuticals did remarkably well, increasing 76% in the first quarter. The stock comprises fully 10.2% of the total portfolio.
- Current loser: Ryanair Holdings fell almost 10% during in the first quarter. It accounts for 8.1% of the entire portfolio.
- New bets: Apart from Valeant, the new additions were Aon and John Wiley & Sons, which make up 7.5% and 2.1% of the total portfolio, respectively.
So there you have it -- the blow-by-blow of Brave Warrior Capital's latest moves. Tell us what you think in the comments section below.
Company data provided by AlphaClone LLC, a San Francisco-based research and investment-management firm that tracks hedge-fund public disclosures. For more information on the firm's investment approach, visit AlphaClone.
IMPORTANT DISCLOSURES FOR BACKTEST PERFORMANCE RESULTS
Backtesting is the process of evaluating a core strategy by applying it to historical data. Backtested performance results are provided for purposes of illustrating historical performance had a core strategy had been available during the relevant period. Backtested performance results are hypothetical and have inherent limitations. AlphaClone makes no representation that any core strategy will achieve performance similar to any backtested performance results. Actual results could differ materially from backtested performance, and future results could differ materially from backtested performance. Past performance is no indication or guarantee of future results.