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 the Eminence Capital hedge fund company, run by Ricky Sandler, who seeks growing companies in growing industries and out-of-favor companies and industries. He also likes to short stocks when he finds ones he expects will decline.
The company's reportable stock portfolio totaled $3.9 billion in value as of March 31, 2013.
So what does Eminence Capital's latest quarterly 13F filing tell us? Here are a few interesting details:
The biggest new holdings are Chicago Bridge & Iron (NYSE:CBI) and Family Dollar. Chicago Bridge and Iron offers construction and engineering services to the energy and natural resources sectors, working on projects related to the water, hydrocarbon, and nuclear industries. It has been boosting its revenue growth rate lately, and its latest earnings report featured a $1.9 billion gain in awards, growing its hefty backlog to $25.5 billion. The company bought Shaw Group last year, which is known for constructing nuclear-related buildings. The stock is up 60% over the past year and has averaged annual growth of about 18.5% over the past decade. Analysts at Lazard Capital, which rate the stock a "buy," recently upped their price target for it from $65 to $75.
Among holdings in which Eminence Capital increased its stake was Qualcomm (NASDAQ:QCOM), which is a top player in the smartphone world, supplying iDevices and Android devices alike with its chips. Some promising moves by the company are its push into emerging markets and display technology, as well as its attention to the health-care industry and telemedicine. Qualcomm recently hiked its dividend by 40%, and its yield is now at 2.3%.
Eminence Capital reduced its stake in lots of companies, including IT consulting and outsourcing specialist Cognizant Technology Solutions (NASDAQ:CTSH), led by a highly rated CEO. Based in New Jersey, but with much of its operations based in India, home to other top outsourcers, Cognizant has been growing briskly, with its most recent quarter featuring double-digit revenue and earnings growth, and projections of continued double-digit growth by management. With a forward P/E of 12.8 well below its five-year average of 22.6, the stock seems attractively priced. Indeed, a director of the company, John E. Klein, recently bought nearly half a million dollars' worth of shares.
Finally, Eminence Capital's biggest closed positions included EMC (NYSE:EMC) and NetApp (NASDAQ:NTAP). Storage giant EMC has been tapping the bond market, borrowing $5.5 billion to help it repurchase close to 10% of its shares. It has also initiated a dividend, recently yielding 1.6%. Many see it poised to gain from the rapidly growing cloud-computing and "Big Data" arenas, and it holds an 80% ownership stake in virtualization specialist VMware, too. EMC has been posting strong numbers and, in many ways, outpacing its smaller rival NetApp.
NetApp, meanwhile, also yields 1.6% these days (via its own new dividend), and recently jumped in price on hopes that an activist investor might help the company's prospects. It has also announced layoffs, and boosted its share buyback plans -- though such share reduction can be offset by stock issuances for employees. The company recently posted disappointing revenue numbers, but it still looks attractive to some, in part due to strong free cash flow. There's also speculation that NetApp might end up acquired by another major data player, such as Oracle.
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.