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 highly regarded value investor David Einhorn and Greenlight Capital, which he founded. Einhorn's investing success as well as his advocacy of financial transparency and accountability have attracted many fans. Although he isn't afraid to short stocks, he prefers going long, and looks for situations where he feels a stock is mispriced.
The company's reportable stock portfolio totaled $6.6 billion in value as of March 31, 2013.
Interesting developments
So what does Greenlight's latest quarterly 13F filing tell us? Here are a few interesting details:
The biggest new holdings are Oil States International and Hess (HES 1.69%). Other new holdings of interest include Spirit AeroSystems (SPR -0.66%). Hess has been transforming itself into a pure-play exploration and production company as its sheds its downstream operations (i.e., refineries, gas stations, etc.). It bungled things in the Eagle Ford shale region, though, managing to lose money where others are making it. Hess has also been a in a proxy fight with activist investment company Elliott Management, with an agreement reached just a few days ago that offers Elliott some seats on the board. Elliott had wanted to split the company in three. Meanwhile, some see Hess as a more attractive takeover target now.
Spirit AeroSystems, an offshoot of Boeing with strong ties to the plane maker as a supplier, has had its skeptics. That's partly due to its supplying parts for Boeing's 787, which has experienced a lot of turbulence coming out of the gate. There are reasons to be hopeful, though, such as its $36 billion backlog and first-quarter revenue and net income up 14% and 10%, respectively, over year-ago levels.
Greenlight Capital upped its stake in Apple and reduced its stake in companies such as Seagate Technology (STX) and Computer Sciences (CSC). Seagate looks like a cheap stock, with its P/E ratio around 6.5. The hard-drive specialist has been whacked by the decline of the PC, but there's still hope, as cloud computing takes off and requires storage and if solid-state drives grow in demand. Seagate is optimistic about its high-capacity drives and is addressing the tablet market, too. It also offers 3.7% dividend yield, which it has been aggressively hiking while also buying back shares.
Information technology outsourcing and service provider CSC saw its shares dip recently, after delivering non-blowout quarterly results. Its future might be brighter than its present, though, as it shifts its focus toward more profitable software and service work. The company is under new management and has been turning itself around, with some seeing it as attractive now.
Finally, Greenlight's biggest closed positions included Ensco and Xerox (XRX). Xerox has been retooling itself, aiming for higher margins. It now gets about half its revenue from services instead of hardware, including some long-term government contracts. Xerox boosted its dividend by 35% earlier this year, signaling confidence from management.
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.
