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 money managers who aren't always 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.
Q2 2011 update
Founded in 1980 and based in Washington, D.C., Avenir is an investment management company, overseeing accounts for families, individuals, and trusts and also for institutions, foundations, and retirement plans. If you've been following this series of reports on impressive money-management companies, you'll notice that most of them focus on value investing -- Avenir is no exception. It seeks a margin of safety in their investments and eats its own cooking, putting its money where its mouth is.
Why should you look at Avenir's moves? Well, according to AlphaClone's back-test simulation, anyone who invested in Avenir's 10 largest long positions (in equal portions) at the time they were disclosed publicly each quarter would have returned 289.2% since 2000, versus 2.6% for the S&P 500 (including dividends) as of Sept. 19.
The total market value of Avenir's disclosed equity holdings as of June 30, 2011 -- the latest quarter for which data is available -- was $759 million across 72 holdings. The company's 10 largest positions and associated changes in number of shares held as of that date were:
(NYSE: AMT)-- reduced 5.4%.
Pioneer Natural Resources
(NYSE: PXD)-- increased 0.3%.
(NYSE: KMX)-- increased 0.4%
(NYSE: CCK)-- reduced 1.1%.
(Nasdaq: MCRS)-- increased 0.2%.
(NYSE: MKL)-- increased 1.8%.
(Nasdaq: PANL)-- increased 0.1%.
(NYSE: AES)-- reduced 66.1%.
American International Group
(NYSE: AIG)-- new.
(Nasdaq: POOL)-- reduced 9.4%.
During the quarter, Avenir also increased its position in Denny's and Six Flags Entertainment, among others. Among the stocks that it reduced its exposure to were Berkshire Hathaway and Brookfield Infrastructure Partners. Avenir also sold out of several stocks entirely, such as Citigroup and Level 3 Communications
The big drop in international energy and utility company AES may be tied to the company's announcement during the quarter that it would buy Ohio utility company DPL, parent of Dayton Power & Light, for $3.5 billion in cash, while also taking on the company's $1.2 billion in debt. Level 3 Communications has its bulls, who focus on its potential, but Avenir's sellout there is understandable, given the company's falling revenue, growing losses, and massive debt.
Selected Q2 2011 commentary
Avenir has close to 34% of its assets in the services sector, with financials and energy comprising another 18% and 13% of the portfolio, respectively. The services stake has shrunk a little in recent quarters, while financials and energy have grown.
Here's where the firm is winning and losing currently and making new bets.
Sirius XM Radio
ATP Oil & Gas
The largest new addition, AIG, comprises 3.1% of the total portfolio. The company got a black eye in the recent financial crisis, but it's been putting that incident behind it. Investors are now pleased to see it profitable again, with some seeing it as a bargain, but it's worth noting that much of its profitability is being generated from its stake in a Hong Kong-based business, not from lots of its global operations. The company has a two-star rating in the Motley Fool CAPS community.
During the quarter, Avenir also started a large new position in Sunrise Senior Living.
We should never blindly copy any investor's moves, no matter how talented the investor. But it can be useful to keep an eye on what smart folks are doing, and 13-F forms can be great places to find intriguing candidates for our portfolios.
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Longtime Fool contributor Selena Maranjian holds no position in any company mentioned. Check out her holdings and a short bio. The Motley Fool owns shares of Berkshire Hathaway, AIG, Markel, Citigroup, and Brookfield Infrastructure Partners. Motley Fool newsletter services have recommended buying shares of American Tower, Brookfield Infrastructure Partners, Universal Display, Markel, and Berkshire Hathaway. 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.