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 Citadel Advisors, founded and run by Kenneth Griffin. It's one of the biggest hedge fund companies around, with a reportable stock portfolio totaling $65.3 billion in value as of Dec. 31, 2012.
According to the folks at InsiderMonkey.com, Griffin and his team use "a combination of advanced computer code, complicated financial algorithms and secrecy. Griffin was using quantitative, technology-based methods before many other firms had cell phones." The company took a big hit of more than 50% back in 2008, and with an impressive 20% gain in 2011, finally surpassed its 2008 high.
So what does Citadel's latest quarterly 13F filing tell us? Here are a few interesting details:
The biggest new holdings are Gulfport Energy and ADT. Other new holdings of interest include Linn Energy (NASDAQOTH:LINEQ), a Houston-based oil and natural gas master limited partnership (MLP) with a dividend yield of about 8%. Some expect the dividend to rise further, due to recent income-generating acquisitions. The company specializes in buying mature, productive energy assets and has also been successful at long-term hedging. Its organic production growth has been strong, too. To some, it seems a very promising investment, but others are wary of its aggressive share issuance, upping its shares outstanding by 74% over the past five years.
Among holdings in which Citadel increased its stake were Halcon Resources (NYSE:HK) and American Capital Agency (NASDAQ:AGNC). Halcon, an oil and gas company, is expected to grow by 30% annually over the coming years. It operates in the promising Bakken region (as well as in the Woodbine and Utica regions), and recently reported 2012 net daily production 128% higher than year-ago levels and proven reserves up 417%. The stock has averaged annual losses of more than 13% over the past five years, but management remains confident. In a recent presentation, it stressed its focus on cash-flow protection, noting that it aims to hedge 80% of its expected production over the coming 18 to 24 months.
American Capital Agency offers investors a huge dividend yield topping 15%. Some worry that the dividend may get reduced (as has happened with some mortgage REITs), but its CEO has offered reassurance by buying more than $500,000 worth of shares for himself recently. In the meantime, the company has boosted the proportion of its portfolio that isn't likely to suffer from borrowers refinancing and prepaying mortgages. Be wary, though, as there are some aspects of the company that aren't too appealing, such as its significant use of leverage). My colleagues have questioned some of management's moves, too.
Citadel reduced its stake in lots of companies, including Skyworks (NASDAQ:SWKS), which is a semiconductor company supplying, among other things, radio chips for iDevices. Its focus extends beyond smartphones, though, as it also supplies the car market and medical devices. Recent weakness in Apple has hurt Skyworks, but its long-term prospects remain strong, in part due to a strong balance sheet and robust profit margins. It compares well against its competitors on a number of measures, but Fool contributor Daniel Sparks sees it with insufficient competitive advantages.
Finally, Citadel's biggest closed positions included Wells Fargo and Chevron. Other closed positions of interest include the Alpine Total Dynamic Dividend (NYSE:AOD) closed-end fund. Closed-end funds offer some advantages over ETFs and other investments, such as being able to trade at discounts to their value, making them more compelling to investors. They can be hard to trade sometimes, though, due to low volume. Late last year, Fool contributor Sean Williams admired Alpine Total's dividend yield and management experience. It recently announced a share buyback plan that could reduce the share count if put into action.
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.