Imitation is the best form of flattery, right? Well, when you're learning a new skill, imitation can also be a great way to hone your craft.

If you're learning guitar, you might pick up a book of Jimi Hendrix's licks or download the chords to a couple of Bob Dylan's songs. So when you're trying to become a better investor, it only makes sense to take a peek at what the professional investors are up to.

For Fools who don't have the time or inclination to pick individual stocks on their own, Shannon Zimmerman at The Fool's Champion Funds newsletter has put together a buffet of mutual funds that have collectively outperformed their benchmarks by more than 13%. The rest of us can tune in directly to what some of the major funds are holding.

You see, the SEC requires institutional investment managers who manage $100 million or more to show their cards via quarterly 13-F filings. This week I've dug in to look at some of the moves that hedge fund SAC Capital Management has been making and, to make things even more interesting, I cross referenced its stocks against the opinions of The Fool's CAPS community.

Below are three stocks that SAC bought more of between its March filing and June filing ...


Percentage Change in SAC Position

Current Market Value of SAC Position

CAPS Rating

Anheuser-Busch (NYSE:BUD)


$182 million


Genentech (NYSE:DNA)


$93 million


Morgan Stanley (NYSE:MS)


$54 million


Source: CapitalIQ, Yahoo!Finance, and CAPS as of Sept. 25, 2007.

... and three that the firm lightened its position in.


Percentage Change in SAC Position

Current Market Value of SAC Position

CAPS Rating



$1.0 million




$5.8 million


General Motors (NYSE:GM)


$9.6 million


Source: CapitalIQ, Yahoo!Finance, and CAPS as of Sept. 25, 2007.

Now before you jump to it and make any hasty moves, remember that we're looking at what SAC has done in retrospect. For all we know, the firm has drastically changed its holdings in any or all of the above stocks since the last 13-F filing. With that in mind, here are some further thoughts to kick off your research.

Know thy enemy, Fool!
So it's not that SAC founder Steve Cohen is a bad man -- I have no idea, I've never met the guy -- but it's quite possible that he, or somebody else at SAC, has been on the other side of one of your transactions. Cohen is a trader through and through, and in an article in New York Magazine that highlighted SAC as one of the elite hedge funds, one industry insider pegged SAC as "the largest trader by volume in the world."

So what does this mean for us Fools? Well, as an example, let's take a look at SAC's history with Cisco's stock.

Total Shares held by SAC

Q1 2006


Q2 2006


Q3 2006


Q4 2006


Q1 2007


Q2 2007


Source: CapitalIQ

Those are some pretty massive swings from quarter to quarter, and I'd wager that we'd see big changes even if we looked at shorter time periods. The first question that pops into my head is whether it was the long-term prospects for Cisco's future success that caused SAC to buy 809,000 shares between the fourth quarter of 2006 and the first quarter of 2007. And if so, was it then a big change for the worse between the first and second quarter of 2007 that caused the firm to sell nearly 1 million shares?

The answer, as you might guess, is most likely no to both questions. SAC has been extraordinarily successful at finding very profitable opportunities in the market, but most of these have been shorter term in nature. For long-term focused Fools like us, the major buying and selling of hedge funds like SAC can create some great buying opportunities.

Nearly 4,000 players on CAPS have rated Cisco an outperform -- many, if not most, because of the company's long-term prospects. One such CAPS player is wickedfool22, who thinks that Cisco is "best in class" and that video and other high-intensity network traffic will be a boon for the company.

So are opportunities hiding out in these SAC trades? Or are its moves just noise for us? Hop on over to CAPS and start interacting with the other 65,000-plus CAPS players. While you're weighing in on these stocks, you can get the scoop on more than 5,000 other stocks that are currently rated on CAPS.

Interested in more companies that can outperform over the long term and, better yet, are priced to perfection? Check out our Motley Fool Inside Value newsletter free for 30 days.

Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. Anheuser-Busch is an Inside Value selection. The Fool's disclosure policy discloses like a pro, but still needs some work on its investing chops.