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 California State Teachers' Retirement System ("CalSTRS"), a major pension fund that's celebrating its 100th anniversary in 2013. It's the largest educator-only pension fund in the world, serving more than 860,000 members, and its total assets recently topped $165 billion. About half its assets are in global equities, with sizable chunks also in fixed income securities, private equity, and real estate.
The fund's latest quarterly 13F filing shows a reportable stock portfolio totaling $29.8 billion in value as of June 30, 2013.
Interesting developments
So what does the filing tell us? Here are a few interesting details:
The biggest new holdings are AbbVie and Actavis. Other new holdings of interest include Zoetis (ZTS -0.71%) and ExOne (XONE). Zoetis was spun off by Pfizer, and is the world's largest animal-health company, and a new addition to the S&P 500. The company is expanding its operations in Nebraska, and is a pure play on animal health. Some see its stock as pricey, with its forward P/E near 20, but others think it deserves a premium valuation, given its competitive position and potential.
ExOne, meanwhile, looks even pricier, with a forward P/E topping 100, and no current P/E due to negative earnings. The company is in the hot 3-D printing business, differentiating itself, in part, by having printers that use sand and metal as raw materials (among other inputs), and not just plastic, as is the case with some rivals. Companies manufacturing jet engines, for example, might find that it revolutionizes their business. It's easy to get excited about this company, but keep in mind that it's still young and small – and sold just 13 printers in 2012.
Among holdings in which CalSTRS increased its stake were MannKind (MNKD 1.24%) and Keryx Biopharmaceuticals (KERX). Biotech concern MannKind has seen its shares nearly triple in value over the past year, with investors hopeful that its inhaled insulin product Afrezza will receive FDA approval soon. The stock has enormous potential, but also significant risk, with approval and strong sales not yet in place. And a lot of success is already built into the stock's recent price, leaving less upside.
Keryx Biopharmaceuticals has soared more than fourfold over the past year, with many expecting FDA approval for its Zerenex drug, which treats kidney disease. Keryx is looking to expand its applications and approvals, too. Keryx has potential, but so far, it also has paltry revenue while it burns cash. Fortunately, it also has ample cash, which should support its drive toward approvals and eventual profits.
CalSTRS reduced its stake in lots of companies, including Fusion-io (FIO.DL), an enterprise storage company focused on technologies such as flash memory and solid-state drives. The company posted strong earnings in its third quarter, and an upbeat outlook, sending its shares soaring -- but then they plunged a few weeks later, when top customers reportedly reduced spending, and the CEO and CMO, both cofounders of the company, abruptly departed. RBC Capital analyst Amit Daryanani recently reduced his price targets for the stock, seeing a slower-than-expected rebound for the firm, as well as increasing competition. Others, though, see the stock, down 20% over the past year, as overly punished, and growing at a good clip.
Finally, CalSTRS's biggest closed positions included Watson Pharmaceuticals (which essentially just renamed itself Actavis), and Ralcorp Holdings, which was bought by ConAgra.
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.
