At The Motley Fool, we understand that it often pays to zig when Wall Street zags, but that doesn't mean that we don't pay attention to what leading fund managers are buying and selling. And hedge funds, which are rarely in lockstep with the broader market, can be a particularly valuable source of insight.
Every quarter, fund managers overseeing more than $100 million must disclose their quarter-end holdings publicly by filing Securities and Exchange Commission Form 13-F. The form lists all U.S.-traded securities the manager held at the end of the quarter. Although the form doesn't disclose the manager's short positions or the manager's intraquarter trades, it can shine a bright light on his or her long stock bets. To help us make use of 13-F data, we turned to Motley Fool partner AlphaClone, a research and investment-management firm that tracks hedge fund public disclosures and develops investment strategies based on them.
Q4 2010 update
Ken Heebner co-founded Capital Growth Management. The firm provides its services to charitable organizations, pension and profit sharing plans, investment companies, and high net worth individuals. The total market value of Capital Growth Management’s disclosed equity holdings as of Dec. 31, 2010 -- the latest quarter for which data is available -- was $6.8 billion across 78 holdings.
The fund's 10 largest positions and associated changes in shares held as of Dec. 31 were:
-
Ford Motor
(NYSE: F) – Reduced 29.9% -
Freeport McMoRan
(NYSE: FCX) – Reduced 9.4% -
Teck Resources
(NYSE: TCK) – Increased 30.3% -
Schlumberger
(NYSE: SLB) – New -
Walter Energy
(NYSE: WLT) – New -
BorgWarner
(NYSE: BWA) – Increased 2.0% -
Tata Motors
(NYSE: TTM) – Increased 652.3% -
priceline.com
(Nasdaq: PCLN) – Reduced 10.7% -
Magna International
(NYSE: MGA) – Increased 57.1% -
Halliburton
(NYSE: HAL) – New
During the quarter, besides the top holdings, the fund increased its positions in Autoliv, Taubman Centers, Tanger Factory, and Nike, while also reducing its exposure to Citigroup and Starwood Hotels & Resorts. The fund sold out 31 stock positions entirely.
Following Capital Growth Management
Is it worth following Heebner? According to AlphaClone's back-test simulation, anyone who invested in Capital Growth Management’s 10 largest holdings at the time they were disclosed publicly each quarter would have returned 123.8% since 2000, versus 10.5% for the S&P 500 (including dividends) as of March 30. Here’s a chart showing AlphaClone’s back-test model:
The strategy above buys/sells its holdings each quarter, five trading days after the SEC's filing window for Form 13-F closes.
Selected Q4 2010 commentary
Capital Growth Management has a diversified portfolio. The biggest sector components of its portfolio are consumer cyclical (29.1%), services (23.5%), and basic materials (16.7%). Other significant sectors include energy (15.7%) and technology (6.8%).
Teck Resources was a big winner, increasing 51% in the fourth quarter of the last year. The stock comprises 4.9% of the total portfolio. Teck mines copper, coal, and zinc, among other metals. The company has a market capitalization of $34.1 billion with a TTM price-to-earnings ratio of 17.9. Teck has a four-star (out of 5) rating at Motley Fool CAPS.
Heebner is known for moving in and out of stocks quickly, and during the quarter, CGM started a position in 36 stocks. The largest new addition, Schlumberger, comprises 4.1% of the total portfolio.
So there you have it: the blow by blow of Capital Growth Management’s latest moves. Tell us what you think in the comments below.
Company data provide by AlphaClone LLC, a San Francisco-based research and investment management firm that tracks hedge fund public disclosures. For more information on the firm's investment approach, click here to visit AlphaClone.
IMPORTANT DISCLOSURES FOR BACKTEST PERFORMANCE RESULTS
Backtesting is the process of evaluating a core strategy by applying it to historical data. Backtested performance results are provided for purposes of illustrating historical performance had a core strategy had been available during the relevant period. Backtested performance results are hypothetical and have inherent limitations. AlphaClone makes no representation that any core strategy will achieve performance similar to any backtested performance results. Actual results could differ materially from backtested performance and future results could differ materially from backtested performance. Past performance is no indication or guarantee of future results.
