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 Atalanta Sosnoff Capital, which was founded in 1981 and is based in New York City. Its investment style is oriented toward growth stocks, as its managers seek earnings growth and multiple expansion. The firm's large-cap equity strategy has outperformed the S&P 500 handily since its inception, returning an annual average of 11.1% versus 9.5% for the S&P 500. In 2010, U.S. investment bank Evercore Partners bought a 49% stake in Atalanta Sosnoff.
The company's reportable stock portfolio totaled $4.5 billion in value as of March 31, 2014.
So what does Atalanta Sosnoff's latest quarterly 13F filing tell us? Here are a few interesting details.
The biggest new holdings are Facebook and Delta Air Lines (NYSE:DAL). Delta Air Lines' stock more than doubled over the past year, during which period the airline industry was hammered by bad weather but still posted increases in its unit revenue. Clearly, the company is doing something right. (It even earned exceptionally high marks for its service.) It has become a cash flow leader in its industry, too, expecting to top $5 billion in 2014. Still, bears worry that its momentum may not be sustainable, and the company itself is projecting fuel price increases.
Among holdings in which Atalanta Sosnoff increased its stake were Cisco Systems (NASDAQ:CSCO) and Transocean Ltd. (NYSE:RIG). Cisco has been rewarding shareholders with a sizable 3.4% dividend yield and stock buybacks, too. Gross margins have been shrinking, while cash flow has not been growing very briskly, but the company still produces a lot of cash. A recent $8 billion debt offering will also help it seize strategic opportunities. With its P/E ratio of 15, bulls see it as undervalued and like its growth potential in cloud computing and data analytics, as well as its data-center and security operations.
Transocean, an offshore drilling rig owner and specialist in ultradeepwater drilling, offers an even bigger dividend yield than Cisco: 5.7%. That's partly because its stock price has dropped, down some 11% over the past year as demand for drill rigs is expected to ease over at least the near term. Transocean has been selling off some assets and focusing on particularly difficult drilling challenges that offer greater profitability. It has also been charging high dayrates and signing contracts, leaving it with an order backlog of $30 billion. Bears don't like its significant debt, though, and the fact that its fleet of rigs isn't very young.
Atalanta Sosnoff reduced its stake in companies including General Electric Company (NYSE:GE) and The Boeing Company (NYSE:BA). General Electric yields 3.5% and has been transforming itself lately, spinning off its sizable retail finance business and becoming much more of an energy company, with oil and gas now its fourth-largest revenue generator. It's more of a manufacturing company, as well. General Electric does carry considerable debt, but it's manageable, as the company generates more than $15 billion in free cash flow annually. There are rumors that GE CEO Jeff Immelt might step down sooner than expected. Meanwhile, GE reports its latest quarterly results tomorrow, with drops in revenue and earnings expected.
Boeing has been serving investors well, averaging 14% annual growth over the past decade. Its 2013 was strong, and many are optimistic about 2014 and the company's big backlog. Boeing's new 777X, which features fuel and operating costs reduced by 10% or more, has also boosted expectations. Some would like to see Boeing executing better and not encountering the kinds of production delays that plagued its 787 Dreamliner. Meanwhile, the company is aiming to cut costs in order to make the Dreamliner more profitable.
Finally, Atalanta Sosnoff's biggest closed positions included American International Group and Chevron Corporation.
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 13F forms can be great places to find intriguing candidates for our portfolios.