As investors, we are always looking for an edge, and there are many to be had. One of the greatest edges we have as small individual investors is that we don't have to disclose our positions in companies. This is not true for large institutional investors, who must report their holdings to the SEC each quarter. These filed reports known as 13-Fs are required for funds with more than $100 million under management. A look at where well-known investors and institutions are placing bets allows us to follow in the footsteps of some of the best.
A sign of the times
In a piece this weekend, The Wall Street Journal highlighted famed short-seller and hedge fund manager William von Mueffling. In June 2009, von Mueffling decided that shorting stocks was no longer a winning proposition because of unprecedented monetary policy and promptly shut down his hedge fund, returning $3.5 billion to investors. In the article, von Mueffling told the Journal, "I'm not saying there aren't overvalued stocks out there. There are, but trying to short them when the government is printing money is a very, very challenging game." QE2, anyone?
However, von Mueffling did not stop managing money. He kept $1 billion in funds and continued to run Cantillon Capital Management more like a traditional mutual fund, only going long on stocks. It appears that von Mueffling made the right decision, as his fund is up 21% this year,attracting asset inflows to surpass the $5 billion mark.
Cantillon is no longer accepting money from outside investors, and von Mueffling is expected to cap all investment around $7.5 billion. However, we can look at Cantillon's very recent 13-F filing, which lists the fund's stocks as of Sept. 30. This will allow us to invest like von Mueffling without ever giving him a dime. Let's look at two of his top holdings and see if they might be a good fit for our portfolio.
Banco Bradesco
Banco Bradesco is Brazil's second-largest private bank behind Itau Uni Banco
Banco Bradesco also boasts a diverse range of banking services for Brazilian consumers, including insurance services, asset management, and pension plan management. The bank also issues credit cards and provides related services.
AutoZone
AutoZone is the largest player in my favorite subsector of the market. The aftermarket auto parts retailers have benefited from favorable economic trends that should boost earnings potential into the future. Americans are driving cars longer, and new-car buying has been on the decline for years. The economy and unemployment near 10% have certainly had a negative effect on car sales, but cars are simply made better today, and drivers are getting much greater mileage from their vehicles.
In 1995, the average age of a vehicle on the road was 8.4 years; today that number has increased significantly to 10.6 years. These older cars require more aftermarket parts and service from the parts retailers and repair shops.
My favorite stock in the sector is O'Reilly Auto Parts
AutoZone is the market leader in the DIY segment, but competes closely with Advance Auto Parts
Looks like diversity
Rounding out the top five holdings in the Cantillon Capital Management portfolio are London-based insurance broker Willis Group Holdings
