Hedge funds make fortunes by looking for unique ways to invest and having a strategy. At The Motley Fool, we value this approach. By tracking the buy and sell decisions of successful fund managers such as massive outperformer Mason Hawkins, we hope to gain insights into hidden opportunities in the market.
Every quarter, any fund managers overseeing more than $100 million must publicly disclose their quarter-end holdings through the Securities and Exchange Commission on a form 13-F. The filing lists all U.S.-traded securities the fund held at the end of the quarter. Although the form doesn't disclose short positions or intraquarter trades, it can illuminate long stock bets.
To better decipher this 13-F data, we turned to Motley Fool partner AlphaClone, a research and investment-management firm that develops investment strategies based on hedge funds' public disclosures.
Meet Southeastern Asset Management
Mason Hawkins has been the CEO of Southeastern Asset Management since 1975. He and his partner also manage the Longleaf Partners Fund, which has a 20-year cumulative return of 921.1% vs. 482.2% for the S&P500.
Hawkins, a University of Florida alumnus, founded his fund looking to invest in companies that had, "good business, good performance, and a good price." That's no easy task on Wall Street. To achieve its goal, the fund looks for companies with a market price no more than 60% of Hawkins' appraisal of their fair value. Hawkins sizes up businesses by studying financial statements, trade publications, and regulatory information, and talking to managers, competitors, and suppliers.
This strategy has richly rewarded the fund. As of March 31, 2011, Southeastern Asset Management was valued at $25.5 billion across 42 holdings. What purchases have powered Southeastern's appreciating portfolio?
Hawkins' fund also increased its holdings in Loews
In addition, Southeastern decided to invest in travel website Expedia
Finally, Southeastern began investing in Abbott Laboratories
Southeastern's 10 largest positions (by value) and associated changes as of March 31 were:
-- increased 25.4%. (NYSE: CHK)
-- increased 8.1%. (Nasdaq: DTV)
-- increased 8%. (Nasdaq: DELL)
-- increased 2.6%. (NYSE: YUM)
-- increased 14%. (NYSE: AON)
-- reduced 14.4%. (NYSE: CX)
- Loews -- increased 28.2%.
-- reduced 19.1%. (NYSE: DIS)
- News Corp. -- increased 33.1%.
-- reduced 1%. (Nasdaq: LINTA)
The fund eliminated its positions in Verizon Communications and Telephone & Data Systems.
How would you have performed following Southeastern Asset Management?
According to AlphaClone's backtest simulation, any Fool who invested every quarter since 2000 in Southeastern Asset Management's 10 largest holdings (at the time they were publicly disclosed) would have returned 94.2%. Including dividends, the S&P 500 returned only 12.7% during that same period. AlphaClone's simulation buys and sells the stocks disclosed in the 13-F five trading days after the SEC's filing window closes.
Highlights from Southeastern's portfolio this quarter include:
- Current winner: Chesapeake Energy did well, increasing 29.4% in the first quarter of the year. The stock makes up 10.4% of the total portfolio, making it the fund's top holding.
- Current loser: Cemex fell 13.3% in the first quarter of 2011. It accounts for 4.8% of the entire portfolio.
So there you have it -- the blow-by-blow of Southeastern Asset Management's latest moves. Tell us what you think in the comments section below.
Company data provided by AlphaClone LLC, a San Francisco-based research and investment-management firm that tracks hedge-fund public disclosures. For more information on the firm's investment approach, visit AlphaClone.
IMPORTANT DISCLOSURES FOR BACKTEST PERFORMANCE RESULTS
Backtesting is the process of evaluating a core strategy by applying it to historical data. Backtested performance results are provided for purposes of illustrating historical performance had a core strategy had been available during the relevant period. Backtested performance results are hypothetical and have inherent limitations. AlphaClone makes no representation that any core strategy will achieve performance similar to any backtested performance results. Actual results could differ materially from backtested performance, and future results could differ materially from backtested performance. Past performance is no indication or guarantee of future results.
The Motley Fool owns shares of Abbott Laboratories, Diamond Offshore Drilling, Yum! Brands, and Aon. Motley Fool newsletter services have recommended buying shares of Abbott Laboratories, Walt Disney, Lowe's Companies, and Chesapeake Energy. Motley Fool newsletter services have recommended writing covered calls in Lowe's Companies. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.