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 John Hussman's Hussman Strategic Advisors, which manages its flagship Hussman Strategic Growth Fund (HSGFX). Hussman, an academic and mathematician, employs a value-investing strategy and hedging. He takes a longtime view, has stressed the importance of discipline in investing, and has sometimes been pessimistic when many respected gurus are optimistic. The Hussman Strategic Growth Fund, which was established in 2000, has averaged annual growth of 4.2% since its inception. And while that may not seem like a lot, much of its existence has been in a tough market environment, when the S&P 500 averaged 3% growth.
The company's reportable stock portfolio totaled $1.8 billion in value as of Sept. 30, 2013.
So what does Hussman's latest quarterly 13F filing tell us? Here are a few interesting details:
The biggest new holdings are General Mills and Mattel. Other new holdings of interest include PotashCorp (NYSE:POT) and Agilent Technologies (NYSE:A). Fertilizer giant Potash, along with its peers, has been challenged by an oversupply in the market and by the breakup of a key Russian cartel. Increases in the price of natural gas, a key production input, also present concerns. Still, over the long run, fertilizer companies hold their appeal due to our growing global need for food. Bulls like PotashCorp's low-cost structure and solid profit margins. PotashCorp recently yielded 4.5%, and its dividend has been hiked 25% this year and some 700% over the past few years.
Bio-analytic and measurement specialist Agilent Technologies has some investors excited about its plans to split itself in two, with the Agilent name attached to its life sciences, diagnostics, and applied markets businesses and the new company focused on electronic measurement technology. Agilent Technologies generates more than $1 billion in free cash flow annually and its top line has been growing, but its earnings have not been rising consistently in recent years. In its last quarter, orders and revenue were both down about 4%. Agilent stock yields just 1%, but its dividend is new and rose by 20% in 2013.
Among holdings in which Hussman increased its stake was Intel (NASDAQ:INTC), which sports a hefty 3.7% dividend yield and has been hiked by an annual average of 10% over the past five years. The dominant chipmaker has been pressured by the weak PC market and has been moving itself into the mobile arena and elsewhere. Some are excited about its inclusion in Apple products, but others want to see a big presence in Google Nexus tablets and smartphones. Some are even looking for a rebound in the PC market.
Hussman reduced its stake in lots of companies, including Exelon (NYSE:EXC), the nation's leader in nuclear energy (which some see as doomed). It yields a hefty 4.3%, but that incorporates a 41% dividend cut earlier in the year. Exelon has been hurt by the relatively high cost of nuclear energy in an environment of very low gas prices. It recently posted strong third-quarter numbers, and bulls like its valuation, with a forward P/E ratio near 11. It has been diversifying its operations, but that leads to more competition, and some have lost faith, with Goldman Sachs analysts, for example, downgrading the stock to sell.
Finally, Hussman's biggest closed positions included Gap and Time Warner Cable. Other closed positions of interest include clinical testing specialist Bio-Reference Laboratories (UNKNOWN:BRLI.DL), a relatively small company with a market cap recently below $1 billion. Bio-Reference has been growing faster than its larger counterparts, in part due to a focus on areas such as esoteric testing, molecular diagnostics, and women's health. Its stock looks attractive with a forward P/E of 14 and its third-quarter report was strong, with record revenue, up 16% over year-ago levels and earnings per share up 18%. Some worry about a whistleblower lawsuit, though.
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.