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 Barrow, Hanley, Mewhinney & Strauss, founded in 1979, and one of the biggest value-focused institutional investment companies around. According to the folks at GuruFocus.com, over the 15 years ending in 2012, Barrow, Hanley racked up a cumulative gain of 143%, compared with just 94% for the S&P 500. Its massive large-cap value equity fund trailed the S&P 500 over the past year, but beat it over the past decade.
The company aims to invest via portfolios that maintain below-average price-to-earnings (P/E) ratios, below-average price-to-book ratios, and above-market-average dividend yields. It also tends to focus on large-cap companies.
Barrow, Hanley's reportable stock portfolio totaled $55.5 billion in value as of March 31, 2013.
So what does Barrow, Hanley's latest quarterly 13F filing tell us? Here are a few interesting details:
The biggest new holdings are Delphi Automotive and Total System Services. Other new holdings of interest include Southwest Airlines (NYSE:LUV). Airlines have long been disastrous, in general, for shareholders, with Southwest a rare exception, generating profits for 40 consecutive years! Its absorption of AirTran is under way, and it has doubled its dividend, though the payout remains tiny. It has bought back more than 7% of its shares, too, and is now the nation's largest domestic airline.
Among holdings in which Barrow, Hanley increased its stake were New York Community Bancorp (NYSE:NYCB) and Seadrill (NYSE:SDRL). New York Community Bancorp, with a whopping 7.5% dividend yield, has been growing via acquisitions lately. Its CEO has been with the company for decades, and is heavily invested in it – literally. In addition, the bank's management is known for prudent management of credit risk.
Seadrill, a deepwater drilling specialist, sports an even bigger dividend yield, at 8.7%. It has been "executing perfectly," but features aggressive financing and high debt. Still, it sports a massive work backlog that tops $20 billion, and its fleet is more modern than those of its peers.
Barrow, Hanley reduced its stake in lots of companies, including Vodafone (NASDAQ:VOD), which holds a 45% stake in the successful Verizon Wireless business, with Verizon holding the other 55%. Vodafone shareholders are watching to see whether Verizon buys out the remaining 45%. The company may be less attractive without the Wireless stake, so there isn't uniform support for the buyout.
Finally, Barrow, Hanley's biggest closed positions included Synovus Financial and Applied Materials. Other closed positions of interest include Corning (NYSE:GLW), which has not been a standout performer in recent years, in part due to low prices and demand for LCD substrates. The stock recently hit a 52-week high, but still sports a P/E ratio of just 13. Some worry that Corning's acclaimed Gorilla Glass is threatened by rising interest in sapphire, while others argue that it's simply a bargain at recent levels.
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.