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 Fred Alger Management, founded in 1964, and managing mutual funds, pension funds, and more. The company explains, "We have remained steadfast to our philosophy and proprietary, bottom-up, fundamental research process, which we believe is the blueprint for our long-standing success." The company was devastated on Sept. 11, 2001, when the majority of its employees who worked at One World Trade Center were killed, but it remains in business, having regrouped.
The company's reportable stock portfolio totaled $16.8 billion in value as of June 30, 2013.
So what does Fred Alger Management's latest quarterly 13F filing tell us? Here are a few interesting details:
The biggest new holdings are NXP Semiconductors and General Motors. Other new holdings of interest include Santarus (NASDAQ: SNTS). Biotech company Santarus has surged some 164% over the past year, with its ulcerative colitis drug Uceris having received FDA approval. Its second quarter featured revenue up 89%, and management upping projections. The company has five drugs on the market, with three of them posting double-digit growth. It has more in its pipeline, too.
Among holdings in which Fred Alger Management increased its stake were speech-recognition software specialist Nuance Communications (NASDAQ:NUAN), and Chinese search-engine giant Baidu (NASDAQ:BIDU). Nuance is a major developer of speech-recognition software, with its technology housed in many Apple devices (think "Siri"). It has been seen as a buyout candidate (perhaps even by Apple), and with activist investor Carl Icahn having gobbled up many shares, the company recently swallowed a "poison pill," limiting takeover possibilities. While some see the stock as undervalued now, others are bailing on the company, not liking its recent performance or its CEO's compensation package. The company's future is quite uncertain, but bulls see potential, such as in the health-care industry's looming deadline to update its coding system.
Chinese search-engine giant Baidu (NASDAQ:BIDU), for example, advanced 19%. It has suffered as China's economic growth has slowed, and has also faced tough competition. Its second quarter featured strong earnings and a rosy outlook. Bulls like its profitability and growth prospects, such as in video, smart TVs, and mobile apps. Also promising is its "Light App" strategy that could profit from sales of less popular apps, capturing the "long tail" of the market. Baidu has been frustrating its short-sellers with its surging price.
Fred Alger Management reduced its stake in lots of companies, including Cliffs Natural Resources (NYSE:CLF). The company has suffered in a weak coal market, but some expect coal prices to rebound and demand to grow, especially abroad. (Cliffs' CEO has noted that iron ore inventory levels in China have been near multi-year lows, and the Chinese economy is showing signs of heating up.) With significant debt, and little to no free cash flow, the stock has been heavily shorted. Some on Wall Street see it as overvalued now, and have downgraded it and trimmed price targets.
Finally, Fred Alger Management's biggest closed positions included News Corp. and Open Table. Other closed positions of interest include rare-earth-materials specialist Molycorp (NYSE: MCP). It has been struggling due to oversupply in the market, and worried investors earlier this year with a surprisingly large share offering and debt issuance. Some also worry about it running out of money before its market turns around -- it has been burning much more cash annually than it has on hand right now. Molycorp's second quarter featured revenue up, but not as much as expected, and net losses much wider than expected. Bulls hope Molycorp can hang on, seeing demand eventually increasing. The company has competition, though, and a rise in production could hurt pricing.
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.