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 Hotchkis & Wiley Capital
Hotchkis & Wiley Capital was founded in 1980 with a value-oriented approach. The total market value of Hotchkis & Wiley Capital's disclosed equity holdings as of March 31, 2011 -- the latest quarter for which data is available -- was $17.9 billion across 139 holdings.

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

  1. JPMorgan Chase (NYSE: JPM) -- reduced 8.7%.
  2. Hewlett-Packard (NYSE: HPQ) -- increased 11.8%.
  3. Royal Dutch Shell (NYSE: RDS-B) -- increased 8.8%.
  4. ConocoPhillips (NYSE: COP) -- reduced 16.6%.
  5. Wells Fargo (NYSE: WFC) -- reduced 7.2%.
  6. CA (Nasdaq: CA) -- reduced 12.8%.
  7. Allstate (NYSE: ALL) -- increased 36.5%.
  8. Exelon (NYSE: EXC) -- increased 10.3%.
  9. Vodafone (NYSE: VOD) -- reduced 1%.
  10. Lockheed Martin (NYSE: LMT) -- reduced 23%.

Outside the top 10 holdings:

  • Rising positions: The fund increased its positions in Microsoft and Edison International, among others.
  • Falling positions: The fund reduced its exposure to Pfizer and Philip Morris International.
  • Eliminated positions: During the quarter, the fund sold out of several stock positions, including Lorillard and Covidien.

Selected Q1 2011 commentary
Hotchkis & Wiley Capital has a highly diversified portfolio, with financial and services stocks making up about half the portfolio. Here's where the firm is winning and losing, and making new bets, at the moment:

  • Current winner: ConocoPhillips did well, increasing 18% in the first quarter. The stock comprises fully 3.3% of the total portfolio.
  • Current loser: Hewlett-Packard fell 2.5% in the first quarter. It accounts for 3.5% of the entire portfolio.
  • New bets: The biggest new additions are Total and Chevron and they together comprise 1.4% of the total portfolio.

So there you have it -- the blow-by-blow of Hotchkis & Wiley Capital'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 Microsoft, Lockheed Martin, Philip Morris International, and JPMorgan Chase, and Wells Fargo. Motley Fool newsletter services have recommended buying shares of Pfizer, Philip Morris International, Exelon, Microsoft, Chevron, Covidien, Vodafone Group, and Total; writing puts on Lorillard; creating a covered strangle position in Exelon; and creating a diagonal call position in Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.