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Every quarter, many money managers have to disclose what they've bought and sold on "13-F" filings. Their latest moves can shine a bright light on smart stock picks.
Today let's look at the Eminence Capital hedge fund company, with a reportable stock portfolio valued at about $2.9 billion as of June 30. The company is run by Ricky Sandler, who seeks growing companies in growing industries and out-of-favor companies and industries. He also likes to short stocks, when he finds ones he expects will decline.
The portfolio's top holdings, representing nearly 16% of its value, are Google, CME Group, and Abbott Labs (NYSE: ABT ) .
So what does Eminence Capital's latest quarterly 13F filing tell us? Here are a few interesting details.
New holdings include IT consulting and outsourcing specialist Cognizant Technology (Nasdaq: CTSH ) and EMC (NYSE: EMC ) . Cognizant's growth has slowed a bit in recent years, but it recently reported solid revenue and earnings increases. Cognizant (and its peers) are expecting slowing demand because of the global economic malaise, but Cognizant is fortunate to not do as much business in troubled Europe as others. Management signaled its bullishness in the second quarter by buying back $358 million worth of shares. Revenue and earnings grew by more than 20% in that quarter, over year-earlier levels.
Data-storage giant EMC is pleasing investors by expanding into flash storage technology, which is a high-growth business. It's expanding in emerging markets, too, in part by partnering with Lenovo to serve China. Management recently noted, "We believe we have the right strategy in place to leverage the 3 major waves of change in IT: cloud, Big Data, and trust." Bulls also like its majority ownership of cloud computing specialist VMware, with some wondering whether the cash-rich company might start paying a dividend soon. Its profit margins have been rising in recent years, too.
Among holdings in which Eminence Capital increased its stake was Abbott Labs, which was boosted enough to become the third-biggest holding. The company will soon be splitting its pharmaceutical business from its nutrition and devices businesses, which some expect will unlock more value for investors. In the meantime, though, the company just got good news when an FDA advisory panel supported approving Abbott's $8 billion drug Humira for an additional condition, colitis, paving the way for more revenue. Meanwhile, the company has been profiting from sizable business in fast-growing emerging markets.
Eminence Capital reduced its stake in several companies, including eBay (Nasdaq: EBAY ) . It may be that Eminence thinks the stock is no longer a bargain, but to some folks, it still looks like a great company at a fair price. The company's PayPal unit is a compelling asset, and eBay has recently joined with the folks at Discover Financial Services to move PayPal into bricks-and-mortar locations. Its flagship online marketplace is growing briskly, too.
Finally, Eminence Capital unloaded several companies, such as MAKO Surgical (Nasdaq: MAKO ) , which is down about 53% over the past year despite selling very exciting robotic-surgery equipment. Many MAKO shareholders are disillusioned, though, as the company hasn't been meeting expectations, and the fact that it's not yet profitable is worrisome, too. It may end up a long-term winner, but it's a risky proposition, as its many short-sellers suggest.
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.
Stocks such as MAKO Surgical offer the potential of huge gains, but they come with risks. If you'd like to learn more about MAKO, check out our new research report on it, which comes with a year of free updates.