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 investing giant Daniel Loeb, founder of the Third Point LLC hedge fund. Loeb is a well known activist investor, famous for publicly airing his opinions about companies in which he invests, and not mincing words when he's displeased. Loeb was instrumental in pointing out discrepancies in former Yahoo! CEO Scott Thompson's biography – paving the way for Yahoo!'s new CEO, Marissa Mayer.
His activity bears watching, because the guy seems to know a thing or two about investing. According to the folks at GuruFocus.com, over 15 recent years, Loeb racked up a cumulative gain of 1,022%, compared with just 124% for the S&P 500.
The company's reportable stock portfolio totaled $5.5 billion in value as of December 31, 2012.
So what does Third Point's latest quarterly 13F filing tell us? Here are a few interesting details.
The biggest new holdings are News Corp. and Tesoro. Other new holdings of interest include AbbVie (NYSE:ABBV) and Herbalife (NYSE:HLF). AbbVie was split off from Abbott Labs, and contains the pharmaceutical business, while Abbott focuses on medical, diagnostic, and nutritional products. AbbVie is saddled with a lot of debt, but it sports about $18 billion in annual revenue, more than $6 billion in free cash flow, and gobs of cash. Bears don't like its being very dependent on its blockbuster drug Humira, which generates half its revenue. It does have other drugs, though, and more in its pipeline – and a 4.1% dividend yield.
Herbalife (NYSE:HLF), while having the support of Loeb and Carl Icahn, has some high-profile naysayers, such as David Einhorn of Greenlight Capital, and Bill Ackman of Pershing Square Capital Management. The company recently reported robust results, with revenue in 2012 rising 18% over year-earlier levels. It sports an attractive 3.2% dividend yield, but those worried about red flags raised by critics (such as concerns about its multi-level-marketing strategy) might want to wait for the dust to settle.
Among holdings in which Third Point increased its stake was ARIAD Pharmaceuticals (NASDAQ: ARIA), which received FDA approval for its leukemia drug Iclusig – though its initial sales have been weak, so far. (The drug seems to be nearing approval in Europe, though, which bodes well.) ARIAD's bone-tumor drug ridaforolimus was rejected in Europe, but it might still prove effective against other cancers. The company has been spending heavily on research and development, and it needs some more success from its pipeline, as it consumes a lot of cash.
Third Point reduced its stake in companies such as Hillshire Brands (NYSE:HSH.DL), which has been trading near a 52-week high. The company, the result of a split-up of Sara Lee, describes itself as "a leader in meat-centric food solutions for the retail and foodservice markets," and encompasses brands such as Jimmy Dean, Ball Park, Hillshire Farm, State Fair, Sara Lee frozen bakery, and Chef Pierre pies. The company has been cutting costs lately, closing some plants, and reducing its workforce. Some think its shares may well plump up, like its hot dogs.
Finally, Third Point's biggest closed positions included Apple and Mondelez International. Other closed positions of interest include Weatherford International (NYSE: WFT), which has been dealing with accounting-related problems. In a recent presentation, though, management noted that its land-based operations, which represent the bulk of its work, have been growing by an annual average of about 16% over the past decade. Its "unconventional" operations, including shale and oil sands, have been growing even more briskly, and the company sees a lot of potential in its operations in China's promising shale gas arena. Still, despite robust revenue growth and plenty of fans, its net income and free cash flow have both dipped into negative territory, while debt has been growing.
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.