Every quarter, many money managers have to disclose what they've bought and sold, via "13F" filings. Their latest moves can shine a bright light on smart stock picks.
Today let's look at investing giant Adage Capital Partners, which is one of the biggest hedge fund companies around, with a reportable stock portfolio totaling more than $27.4 billion as of Sept. 30, 2012. It was founded by Phillip Gross and Robert Atchinson, and invests money for university endowments and charitable foundations, among others. As of last year, the team had outperformed the S&P 500 by three percentage points annually, on average, since inception in 2001.
So what does Adage's latest quarterly 13-F filing tell us? Here are a few interesting details:
The biggest new holdings are Dollar Thrifty Automotive Group and Illinois Tool Works (NYSE:ITW). Other new holdings of interest include rural telecom specialist Windstream (NASDAQ:WINMQ), which has recently hit a 52-week low. The company has lowered its projections, and with its free cash flow less than its payout, its massive 12% dividend yield seems threatened. Meanwhile, revenue has been growing while net income has been shrinking.
Top position additions for Adage included Philip Morris International (NYSE:PM), General Electric (NYSE:GE), and Boeing (NYSE:BA). Sirius XM Radio (NASDAQ:SIRI) was also boosted. Some worry that streaming music competition will sink Sirius, but Sirius has been growing its subscribership and monthly price despite that. (A recent gambit is temporarily activating dormant accounts.) The company's debt load is a concern, but if it can grow its cash flow more, that will become less problematic. Meanwhile, Liberty Media has been approaching majority control of the company, and some think CEO Mel Karmazin will depart in the near future.
Adage reduced its stake in lots of companies, with top reductions including JPMorgan Chase (NYSE:JPM) and PotashCorp (NYSE:POT). Others included Ariad Pharmaceuticals (NASDAQ: ARIA) and Amarin (NASDAQ:AMRN). ARIAD bulls are hopeful about its leukemia drug ponatinib getting FDA approval. Its cash burn has some worried, though, along with its dilutive rising share count. On the plus side, Ariad recently got cleared for an accelerated assessment of ponatinib by the European counterpart to the FDA, and it's seeking the same with the FDA, based on very promising phase 2 trial results. ARIAD got further good news recently, when the FDA said approval for a companion diagnostic wasn't necessary for a ponatinib application. The company's recent quarterly results were mixed, with cash burn a concern.
Amarin, a late-stage cardiovascular-focused biotech company, has bulls excited about its newly approved drug, Vascepa, which some think is underappreciated. There could be more good news if the drug is approved for other treatments. In the meantime, there has been a lot of speculation lately about it being acquired by a big pharmaceutical company, with names such as AstraZeneca (NASDAQ:AZN) and Teva Pharmaceutical (NYSE:TEVA) being mentioned.
Finally, Adage's biggest closed positions included Goodrich and Amylin Pharmaceuticals. Other closed positions of interest include Questcor Pharmaceuticals (NASDAQ: QCOR). Questcor is enjoying solid sales of its multiple sclerosis drug Acthar, which represents a great opportunity. Its shares were cut in half recently on news that Aetna would only cover Acthar for very limited uses, not seeing it as effective enough for broader coverage. Questcor says the Aetna news won't have "a material impact" on the stock, but investors are clearly spooked. Meanwhile, our analysts have found some interesting details in the company's SEC filings.
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.