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 Citadel Advisors, founded and run by Kenneth Griffin. It's one of the biggest hedge fund companies around, with a reportable stock portfolio totaling $57.9 billion in value as of June 30, 2013.
According to the folks at InsiderMonkey.com, Griffin and his team use "a combination of advanced computer code, complicated financial algorithms and secrecy. Griffin was using quantitative, technology-based methods before many other firms had cell phones." The company took a big hit of more than 50% back in 2008, and with an impressive 20% gain in 2011, finally surpassed its 2008 high.
So what does Citadel's latest quarterly 13F filing tell us? Here are a few interesting details:
The biggest new holdings are Newell Rubbermaid and V.F. Other new holdings of interest include the Alpine Total Dynamic Dividend Fund (AOD 1.28%), a closed-end fund. It's worth looking into it if you're interested, as it contains roughly 90 companies, including well regarded ones such as IBM and Qualcomm. But learn more about closed-end funds first, as they offer some appealing features and potentially problematic ones, too (such as low trading volumes). This one sports a distribution rate near 8%, with monthly payouts.
Among holdings in which Citadel Advisors increased its stake was Immersion (IMMR), a key developer and licensor of touch feedback technology. Its second quarter featured revenue up 58% and net income in the black instead of in the red, as it was a year earlier. Immersion has more than 1,300 granted or pending patents, positioning it to be a big player in licensing. It already has agreements in place with companies such as Sharp, LG, and Samsung, among many others – such as Xiaomi, a leading smartphone maker in China. Immersion's stock has surged more than 150% over the past year.
Citadel Advisors reduced its stake in lots of companies, including Navidea Biopharmaceuticals (NAVB 39.52%) and Radian Group (RDN 0.47%). Navidea is a specialist in diagnostics and radiopharmaceutical, with investors excited about Lymphoseek, its FDA-approved injectable agent that can help locate breat cancer and melanoma. How well Lymphoseek sells is rather dependent on Navidea's partner, Cardinal Health. Approval in Europe can also spur sales. Navidea also has more in its pipeline, such a brain-plague-detecting imaging agent for those with Alzheimer's disease or those suspected of having it.
Mortgage insurer Radian has been one of the most popular stocks among hedge funds – for good reason, apparently, as it has tripled in value over the past year. (It's also significantly shorted, as some don't yet believe that it will successfully turn itself around.) The recovering housing market is helping Radian, along with tighter lending rules likely to lead to greater need for its coverage -- but that tighter lending could actually restrict its business. Radian's recently reported second quarter featured losses narrowing and a 60% increase in new mortgage insurance written. Delinquent loans are a risk for Radian, as is strong competition. In July, its number of delinquent loans dropped a bit, and it recently announced a deal with Freddie Mac to reduce its claims exposure.
Finally, Citadel's biggest closed positions included Virgin Media and Halcon Resources. Other closed positions of interest include VirnetX Holding (VHC -8.67%), an Internet software company with valuable patents. Some haven't liked that it spends a lot of time in court -- recently battling Apple, for example. It has also announced a patent license agreement with business communications expert Avaya that was enough to send the shares up more than 10%. Its CEO is the largest shareholder, but that has some folks worried, not reassured.
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, and 13-F forms can be great places to find intriguing candidates for our portfolios.