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 the Eminence Capital hedge fund company run by Ricky Sandler, who seeks growing companies in growing industries and out-of-favor companies and industries. He also likes to short stocks when he finds ones he expects will decline.
The company's reportable stock portfolio totaled $3.4 billion in value as of Dec. 31, 2012.
So what does Eminence Capital's latest quarterly 13F filing tell us? Here are a few interesting details:
The biggest new holdings are State Street and Rockwell Automation. Other new holdings of interest include Emerson Electric (NYSE:EMR). Emerson Electric, which recently yielded 2.8%, has seen its performance pressured by Europe's troubles and a stronger dollar. In its last reported quarter, revenue was up 5% and EPS up 24%, with management noting that, "Recent order trends suggest market conditions have stabilized and may be poised for improvement, particularly in the emerging markets." Some Wall Street analysts see it as undervalued, but our own analysts question that, expecting slower growth.
Among holdings in which Eminence Capital increased its stake were EMC (NYSE:EMC) and NetApp (NASDAQ:NTAP). EMC is a $52 billion storage giant, positioning itself to profit from the rapidly growing cloud-computing and "Big Data" arenas. It also holds an 80% ownership stake in virtualization specialist VMware, though VMware's dominance in its market may mean slower growth in the future. EMC's recent earnings report was solid, featuring strong operating income growth, and many were excited to hear about its plans to launch a joint venture with VMware called Pivotal, combining their cloud and data analytics services. Pivotal is expected to be spun off as a separate company in the future.
With a market cap of $12 billion, NetApp is a smaller rival of EMC and one that has posted strong results recently, with the promise of more as its competition shrinks. Some wonder whether NetApp will end up being acquired by a bigger fish, such as Oracle, another key player in data.
Eminence Capital reduced its stake in lots of companies, including American International Group (NYSE:AIG). AIG has become a hedge fund darling, but it's not the best-performing insurer. My colleague Matt Koppenheffer worries about AIG's tendency to not plan sufficiently for the future, and fellow Fool Morgan Housel recently interviewed the company's high-profile former CEO, Hank Greenberg.
Finally, Eminence Capital's biggest closed positions included Abbott Labs (NYSE:ABT) and Ralcorp Holdings, which was acquired by ConAgra. Abbott has just split its pharmaceutical business from its nutrition and devices businesses. The new pharmaceutical entity is AbbVie, starting out with about $18 billion in annual revenue but also a lot of debt. Some worry that AbbVie is too dependent on its $8 billion drug Humira, which faces patent expiration, though growth in emerging markets may make up for some of that. Abbott has a lot to offer, such as its strong nutritionals business and its vascular business.
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.