Every quarter, many money managers have to disclose what they've bought and sold, via 13F filings. Their latest moves can shine a bright light on smart stock picks.
Today let's look at Kleinheinz Capital Partners, founded in 1996 by John Kleinheinz. Kleinheinz considers himself a contrarian, opportunistic, and value-oriented investor, and is most savvy about the telecom, health-care, and energy industries. Kleinheinz has reportedly averaged 22% annual gains since 1996, which is a strong performance.
Kleinheinz Capital's stock portfolio totaled almost $2 billion in value as of March 31, 2012. Its top three holdings, representing about 17% of the portfolio's overall value, were Apple, Monsanto, and Lukoil.
Interesting developments
So what does Kleinheinz Capital's latest quarterly 13F filing tell us? Here are a few interesting details:
New holdings include Chinese search engine giant Baidu (Nasdaq: BIDU). Bears don't like the fact that China's growth rate seems to be slowing, though bulls point out that even a slower growth rate remains fast. Some worry that the stock is overvalued, though, despite the promising recent deal to include Baidu's search engine on iDevices sold in China.
Among holdings in which Kleinheinz Capital increased its stake were Level 3 Communications (Nasdaq: LVLT) and LED lighting specialist Cree (Nasdaq: CREE). There's a lot to frown at with Level 3, such as its heavy debt load and money-losing history. But it remains a major Internet networking company, and helps companies such as Netflix run. Level 3's increased focus on enterprise customers seems promising, but many remain unconvinced that the stock is worth the risk.
Cree, meanwhile, is expanding in China and boosting its capacity, as well, leaving it well-positioned to profit as LED lighting gains share from incandescent lighting. Still, with P/E and forward P/E ratios well above market averages, the stock isn't offering much margin of safety, even though its free cash flow has been improving.
Kleinheinz Capital reduced its stake in a lot of companies, including EMC (Nasdaq: EMC). That may seem like a contrarian move, with the company generating more than $5 billion in free cash flow over the past year and sporting below-market P/E ratios, despite growing its revenue and earnings at double-digit rates over the past five years. EMC is seeing strong growth in revenue generated abroad, and it owns most of cloud-computing powerhouse VMware, as well.
Finally, Kleinheinz Capital unloaded several companies, such as Diamond Foods (Nasdaq: DMND), which lost ground after it dispatched its CEO and CFO following reports of improper payments to walnut growers. With delays in having restated its earnings, the stock also faces delisting from the Nasdaq Stock Market.
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 13F forms can be great places to find intriguing candidates for our portfolios.
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