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.
Q3 2011 update
Appaloosa Management was founded by David Tepper and is known for investing in the debt of companies in distress. Tepper's investing history includes profiting from distressed debt in companies such as Enron and Worldcom. He made billions on bank stocks in 2009 after they had imploded and before they recovered. More recently, he invested in many housing-related companies.
Why should you look at Appaloosa Management's moves? Well, according to the folks at GuruFocus.com, Appaloosa gained a whopping 1,335% in the first decade of this century, compared with just 16% for the S&P 500.
The total market value of Appaloosa Management's disclosed equity holdings as of Sept. 30, 2011 -- the latest quarter for which data is available -- was about $1.4 billion across 39 holdings. The company's 10 largest positions and associated changes in number of shares held as of Sept. 30, 2011, were:
CVR Energy -- reduced 13%.
(NYSE: GT)-- reduced 22%.
Valero Energy -- reduced 28%.
Macy's -- reduced 47%.
United Continental Holdings -- reduced 27%.
International Paper -- reduced 34%.
(NYSE: DF)-- reduced 12%.
CF Industries -- reduced 37%.
Citigroup -- reduced 65%.
US Airways -- reduced 24%.
During the quarter, Appaloosa Management did far more selling than buying, but it did significantly up its stake in Calumet Specialty Product Partners. Also, the company sold out of many stocks entirely, including Manitowoc
Calumet is a master limited partnership, or MLP, focused on processing crude oil into various products such as lubricants and fuels. Walter Energy had a volatile quarter, falling along with peers partly on concerns about our sluggish global economy, but then rebounding on buyout rumors.
Selected Q3 2011 commentary
Appaloosa Management has a broadly diversified portfolio, with oil & gas, technology, basic materials, and consumer goods representing significant parts of the portfolio. That's a big change from 2009, when the portfolio was heavily weighted toward financial stocks.
Here's where the firm has been winning and losing and making new bets:
Apple was a rare winner for the company in the third quarter, when the S&P 500 sank by about 14%. The reasons are fairly obvious -- the wild success of products such as iPads and iPhones. Many see even more potential not only in new products, but new uses for them, such as the potential uses of iPads in medical settings. The company has a three-star (out of five stars) rating at Motley Fool CAPS.
Shares of Micron Technology
One of the few new buys in the quarter was E*TRADE Financial
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.