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 Joel Greenblatt's Gotham Asset Management. It's of great interest to many investors because Greenblatt is the author of the well-regarded bestseller "The Little Book That Beats the Market" and because his system of seeking out companies with high returns on capital and hefty earnings yields. His "Magic Formula" has many fans. As my colleague Morgan Housel has noted, "The simple formula absolutely destroys market averages over time. Greenblatt backs this up with considerable statistical evidence."
The company's reportable stock portfolio totaled $1.7 billion in value as of Dec. 31, 2012.
So what does Gotham's latest quarterly 13F filing tell us? Here are a few interesting details:
The biggest new holdings are Wells Fargo and Computer Sciences. Other new holdings of interest include American Capital (NASDAQ:ACAS), a business development company (BDC) that's also involved in mortgage-backed securities. It was recently upgraded by analysts at Zacks who liked its expense and debt reduction and better-than-expected earnings. Some are hoping that the company will reinstate its dividend in the near future, as management has said it would like to do, but my colleague John Maxfield has warned that the company may be too inscrutable for most investors.
Among holdings in which Gotham increased its stake were R.R. Donnelley & Sons (NYSE:RRD) and InterDigital (NASDAQ:IDCC). Commercial printer Donnelley provides labels, packaging, and more to the private and public sector. It also prints many thousands of forms for the SEC, and bought Edgar Online. The company took some flack recently when it released Google's earnings report early last year. Bears worry about its debt and fear a dividend cut. The dividend recently yielded a whopping 10%.
InterDigital (NASDAQ:IDCC) may have disappointed investors by not being acquired, but it's otherwise been busy raking in licensing revenue from its many patents (generally focused on mobile telecommunications), selling many of its patents, and also winning some significant legal battles. Also boding well for the company is its last earnings report, in which it handily topped expectations.
Gotham reduced its stake in lots of companies, including Sirius XM Radio (NASDAQ:SIRI). Heavily shorted, Sirius has faced threats from automakers offering their own entertainment products, but for now they are still offering Sirius radio as well. Growing sales of vehicles is also a plus for Sirius, as is Pandora's recent decision to start charging its heaviest users. Despite the pessimism of bears, the stock recently hit a 52-week high.
Finally, Gotham's biggest closed positions included Herbalife and Advanced Micro Devices (NASDAQ:AMD). Advanced Micro hasn't been kind to many investors, averaging an annual loss of about 7% over the past 20 years and down 66% over the past year. It's fighting a struggling PC market and has suffered some heavy free cash flow losses in recent years. Still, bulls are hopeful about its recent cost-cutting and also about the buyout of Dell.
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.