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 with 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 turn to Motley Fool partner AlphaClone, a research and investment-management firm that develops investment strategies based on hedge funds' public disclosures.

Meet Dodge & Cox
Dodge & Cox was founded in 1930. The fund focuses on a disciplined investment approach guided by independent research, portfolio diversification, and a long-term investment horizon. The total market value of Dodge & Cox's disclosed equity holdings as of March 31 -- the latest quarter for which data is available -- was $87.9 billion across 177 holdings.

Why should you care? Because according to AlphaClone's back-test simulation, if you'd invested in Dodge & Cox's 20 top holdings as they were disclosed publicly each quarter, you would have earned a total return of 55.1% between January 2000 and now, versus just 10.1% for the S&P 500.

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

  1. Hewlett-Packard (NYSE: HPQ) -- increased 24.1%
  2. Schlumberger (NYSE: SLB) -- reduced 11.8%
  3. Novartis (NYSE: NVS) -- reduced 0.9%
  4. GlaxoSmithKline (NYSE: GSK) -- increased 0.7%
  5. Comcast (Nasdaq: CMCSA) -- reduced 8.3%
  6. Wells Fargo (NYSE: WFC) -- reduced 0.7%
  7. Capital One (NYSE: COF) -- reduced 2.0%
  8. Vodafone (Nasdaq: VOD) -- reduced 5.3%
  9. News Corp. (Nasdaq: NWS) -- reduced 1.3%
  10. General Electric (NYSE: GE) -- reduced 3.5%

Outside the top 10 holdings:

  • Rising Positions: The fund increased its position in Aegon, among others.
  • Falling Positions: The fund reduced its exposure to Motorola Solutions and Sony.
  • Eliminated Positions: During the quarter, the fund sold out of several stock positions, including Jacobs Engineering and Devon Energy.

Selected Q1 2011 commentary
Dodge & Cox has a diversified portfolio, with the services sector accounting for about a quarter of the portfolio. Technology, health care, financials, and energy also play important roles within the portfolio. Here's where the firm is winning and losing, and making new bets, at the moment:

  • Current winner: Capital One rose more than 22% for the quarter. The stock comprises fully 3.2% of the total portfolio.
  • Current loser: Novartis fell about 4% in the first quarter. It accounts for 3.5% of the entire portfolio.
  • New bets: New additions include Synopsys and Microsoft, which make up 0.8% and 0.6% of the portfolio respectively.

So there you have it -- the blow-by-blow of Dodge & Cox'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.


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, GlaxoSmithKline, Microsoft, Devon Energy, and Schlumberger. Motley Fool newsletter services have recommended buying shares of Vodafone Group, GlaxoSmithKline, Microsoft, and Novartis; creating a diagonal call position in Microsoft; and shorting Jacobs Engineering Group. 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.