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
Christopher C. Davis is the Portfolio Manager of the Davis Large Cap Value Portfolios and a member of the research team of other selected portfolios. All told, he has more than 21 years of experience in investment management and securities research. The total market value of Davis Selected Advisors' disclosed equity holdings as of Dec. 31, 2010 -- the latest quarter for which data is available -- was $58.3 billion across 164 holdings.
The fund's 10 largest positions and associated changes in number of shares held as of Dec. 31 were:
(Nasdaq: COST)-- reduced 6%.
(NYSE: WFC)-- reduced 5%.
(NYSE: AXP)-- reduced 3.3%.
(NYSE: OXY)-- reduced 8.3%.
Bank of New York Mellon
(NYSE: BK)-- reduced 1.1%.
(NYSE: CVS)-- reduced 2.9%.
Canadian Natural Resources
(NYSE: CNQ)-- reduced 2.5%.
(NYSE: DVN)-- reduced 8%.
(NYSE: L)-- reduced 1.9%.
(NYSE: EOG)-- reduced 5.9%.
During the quarter, the firm increased its positions in Monsanto and Lockheed Martin while also reducing its exposure to numerous companies, including Google and Berkshire Hathaway. Also on the sell side, the fund sold out several stocks, including Disney and Ryanair.
Following Davis Selected Advisors
Is it worth following this group's portfolio? Though Christopher Davis has a great reputation, according to AlphaClone's back-test simulation, anyone who invested in Davis Selected Advisors' 10 largest holdings at the time they were disclosed publicly each quarter would have returned 8.2% since 2000, versus 10.5% for the S&P 500 (including dividends) as of March 28. AlphaClone's research looks at buys and sells each quarter, five trading days after the SEC's filing window for Form 13-F closes.
Selected Q4 2010 commentary
Davis Selected Advisors' portfolio is heavily concentrated in three sectors: financials (26.8%), services (23.0%), and energy (15.8%). Other significant sectors include technology (7.8%) and health care (6.9%). Here's where the firm is winning and losing currently and making new bets:
- Current winner: Occidental Petroleum performed well, rising 24% in the fourth quarter of last year. The stock comprises 4.2% of the total portfolio, significant given that there are 164 total holdings in the portfolio. Occidental has a four-star (out of five) rating at Motley Fool CAPS.
- Current loser: EOG Resources declined 1.5% in the fourth quarter of 2010. The company explores, develops, produces, and markets natural gas and crude oil primarily in the U.S., Canada, Trinidad and Tobago, the U.K., and China.
- New bets: The largest new addition, Kraft Foods, comprises 0.4% of the total portfolio. Kraft Foods is the world's second-largest food company. During the quarter, the fund also started new positions in several other companies, including Coresite Realty and Youku.com.
So there you have it, the blow by blow of Davis Selected Advisors' 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 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.