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 in 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 Davis Selected Advisers
Chris Davis is the chairman of Davis Selected Advisers. Davis Advisors seeks to purchase shares of durable, well-managed businesses at value prices and hold them for the long term. The total market value of Davis Selected Advisers' disclosed equity holdings as of March 31 -- the latest quarter for which data is available -- was $59.1 billion across 164 holdings.

Why should you care? Because according to AlphaClone's back-test simulation, if you'd invested in Davis Selected Advisers' 20 top holdings as they were disclosed publicly each quarter, you would have earned a total return of 68.8% between January 2000 and now, versus just 11.2% for the S&P 500.

The fund's 10 largest positions (by value) and associated share-count changes as of March 31 were:

  1. Wells Fargo (NYSE: WFC) -- reduced 0.2%
  2. Costco Wholesale (Nasdaq: COST) -- reduced 6.4%
  3. American Express (NYSE: AXP) -- reduced 4.1%
  4. Occidental Petroleum (NYSE: OXY) -- reduced 1.0%
  5. EOG Resources (NYSE: EOG) -- reduced 1.8%
  6. The Bank of New York Mellon (NYSE: BK) -- increased 5.9%
  7. CVS Caremark (NYSE: CVS) -- increased 0.5%
  8. Devon Energy (NYSE: DVN)-- reduced 2.4%
  9. Canadian Natural Resources (NYSE: CNQ) -- reduced 0.3%
  10. Loews (NYSE: L) -- increased 0.3%

Outside the top 10 holdings:

  • Rising Positions: The fund increased its positions in ACE and Air Products & Chemicals.
  • Falling Positions: The fund reduced its exposure to Carmax and Procter & Gamble.
  • Eliminated Positions: During the quarter, the fund sold out of several stocks, including Hershey and Shaw Group.

Selected Q1 2011 commentary
Davis Selected Advisers has more than half its assets invested in financial and services stocks. Here's where the firm is winning and losing, and making new bets, at the moment.

  • Current winner: EOG Resources did well, increasing 30% in the first quarter. The stock comprises 4.3% of the total portfolio.
  • Current loser: CVS Caremark and Bank of New York Mellon each fell about 1% in the first quarter. They account for 4% and 4.2% of the entire portfolio, respectively.
  • New bets: The two biggest new additions are Expedia and Disney, and they comprise 0.3% and 0.2% of the total portfolio.

So there you have it -- the blow-by-blow of Davis Selected Advisers' 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.


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.

The Motley Fool owns shares of Wells Fargo, Costco, and Devon Energy. Motley Fool newsletter services have recommended buying shares of Procter & Gamble, Disney, and Costco. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.