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
The name RBS Partners may not ring many bells, but its founder, Eddie Lampert, is much more familiar. He chairs the board of Sears Holdings (Nasdaq: SHLD ) and while he has been compared to Warren Buffett because of his investing acumen as well as his value-investing orientation and his tendency to concentrate his money on relatively few investments, he's also been frequently doubted, such as for his optimism about Sears. RBS is the parent of ESL Investments.
Don't let the tie to Sears Holdings deter you from paying attention to Lampert and RBS, though. According to AlphaClone's back-test simulation, anyone who invested in RBS Partners' 10 largest long positions (in equal portions) at the time they were disclosed publicly each quarter would have gained 221% since 2000, versus a 3% loss for the S&P 500 (including dividends) as of Sept. 23.
The total market value of RBS Partners' disclosed equity holdings as of June 30, 2011 -- the latest quarter for which data is available -- was a whopping $10.14 billion across only 11 holdings. The company's positions and associated changes in number of shares held as of June 30, 2011, were:
- Sears Holdings -- unchanged.
- AutoZone (NYSE: AZO ) -- reduced 10.6%.
- AutoNation (NYSE: AN ) -- unchanged.
- Gap (NYSE: GPS ) -- increased 12.1%.
- Capital One Financial (NYSE: COF ) -- reduced 14.8%.
- CIT Group (NYSE: CIT ) -- increased 29.5%.
- Wells Fargo (NYSE: WFC ) -- new.
- Cisco Systems (Nasdaq: CSCO ) -- increased 3.0%.
- Seagate Technology (NYSE: STX ) -- reduced 9.4%.
- Genworth Financial (NYSE: GNW ) -- unchanged.
- Big Lots (NYSE: BIG ) -- unchanged.
RBS clearly puts its money where its conviction is, in a very focused way. Its stake in Sears Holdings amounts to 45% of the company's outstanding shares, while it owns 23% of AutoZone, 43% of AutoNation, and more than 5% of Gap.
Selected Q2 2011 commentary
RBS Partners concentrates almost exclusively in the services sector. Clearly, Lampert is seeing more value there than in other sectors.
Here's where the firm has been winning and losing and making new bets:
Seagate Technology was a big winner in the quarter, rising more than 13%. One reason investors in the quarter were bullish on the company was its purchase of Samsung's hard drive division, which will speed Seagate's growth in solid-state drives and other promising technologies. The company has a four-star (out of five stars) rating at Motley Fool CAPS.
Sears Holdings didn't do so well, dropping more than 13% in the quarter. The company has been struggling for a long time, and during the quarter my colleague Alyce Lomax called it a "shambling, soulless wreck of a stock." That was after the company forecast upcoming losses instead of expected profits. In its second quarter the news wasn't any better, with shrinking revenue and accelerating losses. The company has a one-star rating in Motley Fool CAPS.
The only new addition, Wells Fargo, is often regarded as one of the better-managed big banks, with fans such as Warren Buffett. After slashing its dividend by 85% in the credit crisis of several years ago, it has recently more than doubled it (though it's still far below its peak). During the quarter, lower loan loss reserves led to rising profits. The company has a three-star (out of five stars) rating at 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, and 13-F forms can be great places to find intriguing candidates for our portfolios.
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