Here's What This 178% Gainer Is Buying

Every quarter, many money managers have to disclose what they've bought and sold. Their latest moves can shine a bright light on smart stock picks.

Today let's look at Barrow, Hanley, Mewhinney & Strauss, one of the biggest value-focused institutional investment companies around, with more than $50 billion in assets as of March 31, 2012. According to the folks at GuruFocus.com, from 1996 to 2011, Barrow, Hanley racked up a cumulative gain of 178%, compared with just 124% for the S&P 500.

The company aims to invest via portfolios that maintain below-average price-to-earnings ratios, below-average price-to-book ratios, and above-market-average dividend yields. It also tends to focus on large-cap companies.

The company's top holdings as of March 31 were Philip Morris International, ConocoPhillips, and American Express

Interesting developments
So what does Barrow, Hanley's latest quarterly 13-F filing tell us? Here are a few interesting details:

New holdings include CA Technologies (Nasdaq: CA  ) , a maker of IT management software. It has been impressing investors with rising profits lately, and recently signaled a lot of management confidence when it quintupled its dividend. The company supports cloud-based operations and has been boosting its sales force, targeting growing companies in developing economies, such as in Latin America and Asia.

Among holdings in which Barrow, Hanley increased its stake are New York Community Bancorp (NYSE: NYB  ) and fellow financial institution Synovus Financial (NYSE: SNV  ) . New York Community Bancorp is appealing almost for its dividend alone, which recently approached 8%. At a recent conference, management cited the company's unusual focus on multifamily lending, its risk aversion, and its exceptionally high efficiency ratio. It has been growing via acquisitions, too – it's made 10 since 2000.

Synovus recently beat analysts' earnings estimates. But it hasn't yet paid back its $1 billion TARP loan, and also stated that the repayment was "not a near-term event." It has been improving its financial condition but needs to ramp up its earnings somehow.

Barrow, Hanley reduced its stake in a handful of companies, including commercial printer R. R. Donnelly & Sons (Nasdaq: RRD  ) . The company's detractors point to its high debt, along with its "declining industry with low barriers to entry." It faces a pension gap, as well.

Finally, Barrow, Hanley unloaded several companies entirely, such as energy concern EXCO Resources (NYSE: XCO  ) , which has been affected by extremely low natural-gas prices. Insiders are more bullish, as many have been buying shares -- perhaps expecting long-term success as the price of gas is likely to rise eventually.

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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. 13-F forms can be great places to find intriguing candidates for our portfolios.

Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter, owns shares of American Express, but she holds no other position in any company mentioned. Click here to see her holdings and a short bio. Motley Fool newsletter services have recommended buying shares of Philip Morris International and writing a covered strangle position in American Express. The Motley Fool has a disclosure policy.

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  • Report this Comment On May 16, 2012, at 12:45 PM, rsinj wrote:

    What do you mean "many insiders" have been buying shares of XCO? That is patently untrue. Only one insider has been buying and he's been throwing good money after bad for the past year trying to show that he's right, but instead provides a good case study showing that one person cannot influence the market or cover up for the horrendous performance of a poor company and terrible management.

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