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 Caxton Associates, founded in 1983 by Bruce Kovner. The investment company is known for relatively few years of negative returns and for average annual gains of about 20% since its inception nearly 30 years ago (per a Wall Street Journal article). That's a powerful record.
Caxton is also known for charging clients dearly for the privilege of going along for the ride. In an industry known for routinely charging 2% of assets annually while also taking 20% of profits, Caxton had long charged 3% and 30%, though that was shaved down to 2.6% and 27.5% last year -- still very steep. (It's not the only one with such above-average fees.)
The company's reportable stock portfolio totaled $2.4 billion in value as of Dec. 31, 2012.
So what does Caxton Associates' latest quarterly 13F filing tell us? Here are a few interesting details:
The biggest new holdings are Williams (NYSE:WMB) and puts on the iShares Russell 2000 ETF (NYSEMKT:IWM), which focuses on small-cap companies. Other new holdings of interest include R.R. Donnelley & Sons (NYSE:RRD) and Northstar Realty Finance (NYSE:NRF). Commercial printer Donnelley provides labels, packaging, and more to the private and public sector. It prints many thousands of forms for the SEC and bought Edgar Online. Bears worry about its steep debt load and a possible reduction of its massive dividend, which recently yielded 9.4%. To succeed, the company needs to do more digital business.
NorthStar Realty Finance (NYSE:NRF) is another strong dividend payer, recently yielding 7.5%. It has been growing its revenue at a double-digit clip over the past few years, and offers the benefit of being diversified between real estate debt, mortgage-backed securities, and the old-fashioned leasing of owned properties. While many mortgage-related real estate investment trusts (REITs) have been cutting their dividends, NorthStar recently upped its payout.
Among holdings in which Caxton increased its stake was Melco Crown Entertainment (NASDAQ:MLCO), which operates casinos in gaming Mecca Macau. The company has been performing well lately, racking up revenue and earnings gains and more than doubling its EBITDA margin over the past few years. It's expanding with properties in the Philippines and elsewhere, too. (The Philippines is expected by some analysts to become a $3 billion gambling market by 2015.)
Caxton reduced its stake in lots of companies, including Regions Financial (NYSE:RF). The bank is attractive on many counts. It's repaid its TARP obligation, is posting improving net interest margin and asset quality, and has a powerful presence in the growing Southeast region. Its recent quarter featured a swing from a big loss to a big gain, among other achievements, and a recent stress test revealed improvement in its financial condition, with dividend hikes on the way.
Finally, Caxton Associates' biggest closed positions included the SPDR Select Sector Energy ETF (NYSEMKT:XLE) and calls on Best Buy (NYSE:BBY). Other closed positions of interest include Companhia Siderurgica Nacional (NYSE:SID), a massive steel company based in Brazil. Analysts at Zacks have maintained a neutral rating on the stock, worried about its rising costs, along with weakness in Europe and a slowing growth rate in China. My colleague Rich Duprey is more bullish, though, noting an uptick in the Chinese economy and a U.S. housing recovery, both of which can spur demand.
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.