At The Motley Fool, we understand that it often pays to zig when the rest of Wall Street zags. Like us, hedge funds rarely move in lockstep with the broader market. By tracking these little-followed funds' buy and sell decisions, we can often gain valuable insights into opportunities the market might be missing.
Every quarter, any fund managers overseeing more than $100 million must publicly disclose their quarter-end holdings via the Securities and Exchange Commission's Form 13-F. It lists all U.S.-traded securities the fund's manager held at the end of the quarter. Although the form doesn't disclose short positions or intraquarter trades, it can illuminate long stock bets.
To better decipher this 13-F data, we turned to Motley Fool partner AlphaClone, a research and investment-management firm that develops investment strategies based on hedge funds' public disclosures.
Meet Capital Growth Management
Ken Heebner co-founded Capital Growth Management in 1990. The total market value of Capital Growth Management's disclosed equity holdings as of March 31, 2011 -- the latest quarter for which data is available -- was $6.6 billion across 82 holdings.
Why should you care? Because according to AlphaClone's back-test simulation, if you'd invested in Capital Growth's 20 top holdings as they were disclosed publicly each quarter, you would have earned a total return of 155.9% between January 2000 and now, versus just 11.3% for the S&P 500.
The fund's 10 largest positions (by value) and associated share-count changes as of March 31 were:
-
Tata Motors
(NYSE: TTM) -
priceline.com
(Nasdaq: PCLN) -
National Oilwell Varco
(NYSE: NOV) -
Baker Hughes
(NYSE: BHI) -
CBS
(NYSE: CBS) -
Schlumberger
(NYSE: SLB) -
ASML Holding
(Nasdaq: ASML) -
Lam Research
(Nasdaq: LRCX) -
United Continental Holdings
(NYSE: UAL) -
CSX
(NYSE: CSX)
Outside the top 10 holdings:
- Rising positions: The fund increased its positions in Apple and BHP Billiton.
- Falling positions: The fund reduced its exposure to Halliburton.
- Eliminated positions: During the quarter, the fund sold out of several stock positions, including Ford and Sandisk.
Selected Q1 2011 commentary
Capital Growth Management has a highly diversified portfolio. Services stocks make up the biggest part of the portfolio at 30%, with technology, energy, and transportation also having significant allocations. Here's where the firm is winning and losing, and making new bets, at the moment:
- Current leader: CBS is the current winner, increasing 32% in the first quarter. The stock made up 3.3% of the total portfolio as of March.
- Current laggard: Top holding Tata Motors fell 5% in the first quarter; it accounts for 4.1% of the entire portfolio.
- New bets: The portfolio saw several dozen new additions during the quarter, with ASML Holding and LAM Research being the biggest at 3.3% and 3% 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 section below.
Company data provided 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, 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.
