Invest Like a Pro: Farallon Capital Management

Imitation is the best form of flattery, right? Well, when you're learning a new skill, imitation can also be a great way to hone your craft.

If you're learning guitar, you might pick up a book of Jimi Hendrix's licks or download the chords to a couple of Bob Dylan songs. So when you're trying to become a better investor it only makes sense to take a peek at what the professionals are up to.

For the Fools that don't have the time or inclination to pick individual stocks on their own, Shannon Zimmerman at The Fool's Champion Funds newsletter has put together a buffet of mutual funds that have collectively outperformed their benchmarks by over 11%. For the rest of us, we can tune in directly to what some of the major funds are holding.

You see, the SEC requires institutional investment managers who manage $100 million or more to show their cards via quarterly 13F filings. This weekm I've dug in to pull up some of the moves that hedge fund Farallon Capital Management has been making and, to make things even more interesting, I cross-referenced its stocks against the opinions of the Fool's CAPS community.

Below are three stocks that Farallon bought more of between its March filing and June filing ...

... and three that the fund lightened its position on.

Now, before you jump to it and make any hasty moves, remember that we're looking at what Farallon has done in retrospect. For all we know, since the last 13F filing, the firm has drastically changed its holdings in any or all of the above stocks. With that in mind, here are some thoughts on a couple of these stocks to kick off further research.

Though Farallon does not have much direct exposure to the housing market, the firm appears to be bullish on a handful of stocks from housing-related sectors. Both Home Depot, an Inside Value recommendation, and Cemex, a dual pick from Stock Advisor and Global Gains, have seen their stock price decline in recent months as the troubles in the housing and mortgage markets continue to hog the spotlight. Investors are obviously expecting that the housing slowdown will persist for a while longer and ripple out and weigh down business for related industries.

Some investors, though, have taken the opposite view and are starting to recognize value left over in the wake of the housing meltdown. Home Depot, which has had operational issues and a management shift to compound the general market issues, hasn't won the hearts of CAPS players quite yet. Cemex, however, has wrangled 1,557 outperform ratings from CAPS players, versus just 37 underperforms. Per the worries about the U.S. housing market, CAPS player Adizrael notes that Cemex's business is very geographically diverse and the company is "able ... to absorb U.S. declines and still grow earnings through strength in other parts of the world."

Despite its apparent interest in some housing-related companies, Farallon seems to have noticed that the credit markets were going to get much worse before they got better. By unloading half of its position in KKR Financial -- a mortgage loan investor -- the fund lessened its exposure to the 35% drop in that stock since the end of the second quarter. CAPS players haven't been enchanted with the stock's prospects either, and one CAPS All-Star, abitarecatania even quipped "I guess 'smart money' can be stupid, just like the rest of us."

Eager to read more commentary from the CAPS community on these Farallon-owned stocks? Hop on over to CAPS and start interacting with the other 60,000-plus CAPS players. While you're checking out these stocks, you can also find out more about over 4,900 other stocks that are currently rated on CAPS.

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Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. Microsoft is a selection of our Inside Value newsletter. The Fool's disclosure policy invests like a pro, but has been told that it plays ball like a girl.