At The Motley Fool, we understand that it often pays to zig when Wall Street zags, but that doesn't mean 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
SPO Advisory is a hedge fund company previously known as Main Street Partners. Founded in 1991, its investment strategy is one focused on value as its managers aim to buy stocks for much less than they're worth. They also are very focused, holding very few stocks and thus displaying great confidence in each.
Why should you look at SPO Advisory's moves? Well, according to AlphaClone's back-test simulation, anyone who invested in SPO Advisory's 10 largest long positions (in equal portions) at the time they were disclosed publicly each quarter would have gained 224% since 2000, versus a flat showing for the S&P 500 (including dividends) as of Sept. 27.
The total market value of SPO Advisory's disclosed equity holdings as of June 30, 2011 -- the latest quarter for which data is available -- was $8.41 billion across only 17 holdings. The company's 10 largest positions and associated changes in number of shares held as of June 30, 2011, were:
- Calpine (NYSE: CPN ) -- unchanged.
- Crown Castle International (NYSE: CCI ) -- reduced 11.8%.
- Liberty Global (Nasdaq: LBTYK ) -- unchanged.
- Pioneer Natural Resources (NYSE: PXD ) -- reduced 1.9%.
- Charles Schwab (Nasdaq: SCHW ) -- increased 11.0%.
- Visa (NYSE: V ) -- increased 31.9%.
- Lamar Advertising (Nasdaq: LAMR ) -- unchanged.
- Advent Software (Nasdaq: ADVS ) -- unchanged.
- Martin Marietta Materials (NYSE: MLM ) -- unchanged.
- Quicksilver Resources (NYSE: KWK ) -- unchanged.
Visa has many bulls in its corner who love its globally strong brand. Financial reforms may put a little pressure on its profitability, but it will remain a cash cow. Crown Castle has been benefiting from increased usage of mobile Internet, the advancement of 4G networks, and increases in site-rental revenue, but some investors don't like its debt load.
During the quarter, SPO Advisory also increased its position in Oasis Petroleum (NYSE: OAS ) and reduced its exposure to BPZ Resources (NYSE: BPZ ) and SBA Communications. It sold out of Cambium Learning entirely. The decrease in BPZ Resources may be due to concerns about the stability of Peru, where the company bases a lot of its work.
Selected Q2 2011 commentary
SPO Advisory has more than 37% of its assets in the services sector, but that's down sharply from around 51% a few quarters ago. Energy and utilities comprise another 19% and 17% of the portfolio, respectively. Here's where the firm has been winning and losing:
Recent winner
Visa was a big winner for the SPO Advisory in the quarter, rising nearly 15%. It was during the quarter that the Federal Reserve set the swipe-fee caps for debit cards at $0.21 to $0.24. This hurts card companies, as the previous average fee was $0.44, but it also was good news in that it ended uncertainty on the issue and because the caps weren't any lower. Visa has a four-star rating (out of five stars) at Motley Fool CAPS.
Recent loser
Pioneer Natural Resources dropped 12% in the quarter, but many see great potential in it, because of its exposure to shale energy. In the quarter, it inked a joint venture with India's Reliance Industries that will increase its production fifteenfold or more. The company has a three-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, and 13-F forms can be great places to find intriguing candidates for our portfolios.
Looking for some promising investments? Read this free report from The Motley Fool to find the names of five stocks we own that you should, too.
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