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 Farallon Capital Management, founded by Thomas Steyer in 1986, and employing a bottom-up fundamental investing strategy.
The company's reportable stock portfolio totaled $4.3 billion in value as of December 31, 2012.
So what does Farallon's latest quarterly 13F filing tell us? Here are a few interesting details:
The biggest new holdings are Dollar General and EMC. Other new holdings of interest include Dynavax Technologies (NASDAQ:DVAX) and Freeport McMoRan Copper & Gold (NYSE:FCX). Dynavax has likely hurt the Farallon portfolio, dropping sharply upon an FDA rejection of its hepatitis B vaccine Heplisav. The FDA left open the possibility of a more limited approval, but Dynavax now has more work to do, and it's burning through cash, while its revenue has been shrinking. Fortunately, it does seem to have have ample cash to keep it afloat for a few years. Investors are right to worry about share dilution, too.
Freeport posted strong fourth-quarter results, and is cutting its costs, as well. It's also expanding its scope, moving into oil and gas exploration -- which has some investors not thrilled, seeing it as a loss in focus. The stock looks attractive, trading near a 52-week low, and with a forward P/E ratio of just eight. It sports a 3.8% dividend, too, and management is expecting moderate growth in the near-term. Bears worry about interest rate hikes from the Fed, though, which can make some alternatives to gold more attractive.
Among holdings in which Farallon Capital Management increased its stake was Westport Innovations (NASDAQ:WPRT). Westport designs low-emissions engines that run on natural gas, among other things. Many think its future is bright, thanks to a growing interest in alternative fuels, and currently low prices for natural gas -- which may rise. The company recently inked a deal with a China-based natural-gas-fueling-station concern, and it's also set to provide engines for two of the biggest U.S. transit fleets.
Farallon Capital Management reduced its stake in lots of companies, including Oracle (NYSE:ORCL). Oracle, meanwhile, has been shifting its focus from hardware to the cloud computing realm -- though some are crying foul there. The company has been posting double-digit revenue and earnings growth rates over the past few years, and bulls see competitive strengths in its cash pile and strong customer roster. Oracle is buying telecom infrastructure specialist Acme Packet, which has some scratching their heads due to a lot of strong competition in its field.
Finally, Farallon's biggest closed positions included Qualcomm and CBS. Other closed positions of interest include Molycorp (OTC:MCPIQ), which has been struggling in a tough environment and worrying investors with a surprisingly large share offering and debt issuance, as well as negative free cash flow. Still, for those who can accept considerable risk and volatility, there's a lot of promise in Molycorp, in part due to its acquisition of Neo Materials Technologies, and its potential to become a powerful low-cost producer. Some patience may be required, though, as its just-released earnings delivered disappointing results, and management warned of a weak first half of 2013 due to low prices and customers with high inventories.
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. Therefore, 13-F forms can be great places to find intriguing candidates for our portfolios.