At The Motley Fool, we understand that it often pays to zig when Wall Street zags, but that doesn't mean that we don't pay attention to what leading fund managers are buying and selling. And funds that aren't always in lockstep with the broader market can be a particularly valuable source of insight.
Every quarter, fund managers overseeing more than $100 million must disclose their quarter-end holdings publicly by filing Securities and Exchange Commission Form 13-F. The form lists all U.S.-traded securities the manager held at the end of the quarter. Although the form doesn't disclose the manager's short positions or the manager's intraquarter trades, it can shine a bright light on his or her "long" stock bets. To help us make use of 13-F data, we turned to Motley Fool partner AlphaClone, a research and investment-management firm that tracks hedge fund public disclosures and develops investment strategies based on them.
Q2 2011 update
Here's a fund company that's suddenly of interest to many of us: Peninsula Capital Advisors, founded and managed by Ted Weschler. Weschler was an unknown name to most investors until Warren Buffett announced that he'd be joining Todd Combs in managing some of Berkshire Hathaway's (NYSE: BRK-B ) billions -- and is therefore being considered as someone who might take over Buffett's investing job whenever Buffett steps down.
We don't know much about Weschler yet, but we'd do well to pay attention. According to AlphaClone's back-test simulation, anyone who invested in Peninsula Capital Advisors 10 largest long positions at the time they were disclosed publicly each quarter would have returned 92% since late 2003, versus just 30% for the S&P 500 (including dividends). (Note that this data reflects the holdings of the overall Peninsula company, and not necessarily any one particular fund.)
The total market value of Peninsula Capital Advisors' disclosed equity holdings as of June 30, 2011 -- the latest quarter for which data is available -- was $1.96 billion across nine holdings. The company's positions and associated changes in number of shares held as of June 30, 2011 were:
- DirecTV (Nasdaq: DTV ) -- increased 42.9%.
- W.R. Grace (NYSE: GRA ) -- unchanged.
- DaVita (NYSE: DVA ) -- unchanged.
- Liberty Capital (Nasdaq: LCAPA ) -- reduced 12.9%.
- Valassis Communications (NYSE: VCI ) -- unchanged.
- Cogent Communications (Nasdaq: CCOI ) -- unchanged.
- Cincinnati Bell (NYSE: CBB ) -- unchanged.
- WSFS Financial (Nasdaq: WSFS ) -- unchanged.
- Fiber Tower (Nasdaq: FTWR ) -- unchanged.
DirecTV gained interest during the quarter when it started exploring the possibility of offering a streaming service similar to Netflix's (Nasdaq: NFLX ) . It was also racking up big subscriber gains abroad, such as in Latin America. Liberty Capital holds a 40% stake in Sirius XM Radio (Nasdaq: SIRI ) , so the satellite-radio company's heavy debt weighs on Liberty as well. More recently, Liberty worried some investors when it expressed interest in buying Barnes & Noble's "dying business platform."
During the quarter, Peninsula Capital Advisors sold out of just one stock entirely, TiVo (Nasdaq: TIVO ) . The company has been posting growing revenue, but it's still in the red, losing subscribers, and focusing on some features in its new offerings that may not matter to customers, such as the ability to record four programs simultaneously.
Selected Q2 2011 commentary
Here's where Peninsula Capital Advisors has been winning and losing:
Recent winner
Specialty chemical company W.R. Grace gained about 19% during the quarter. It's true that it has emerged from bankruptcy protection, but those troubles were due to asbestos litigation, not to operational issues. The company has been posting strong results lately, and it has a two-star (out of five stars) rating at Motley Fool CAPS.
Recent loser
Fiber Tower shed 40% of its value in the quarter, as it continues posting net losses despite rising revenue. In its most recent earnings report, management stated, "While the changing dynamics of the wireless industry and increased competition are creating near-term pressure on the business, we are pursuing opportunities with customers that leverage our microwave expertise as we explore alternatives to address our funding needs." The company has a two-star rating in Motley Fool CAPS.
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. The 13-F forms can be great places to find intriguing candidates for our portfolios.
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