IN THIS ISSUE:
Maintaining a Canadian Edge by David Dittman
13F Filings: Superstar Investors Buys and Sells by Yiannis G. Mostrous
Asset Allocation for a New Demographic Destiny by Jim Fink
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13F Filings: Superstar Investors Buys and Sells
by Jim Fink
2/28/2012
If it’s February, it must be time once again for institutional money managers with assets of at least $100 million to update the Securities & Exchange Commission (SEC) on their stock holdings via Schedule 13F.
Back in November – the last time shareholders were required to update their holdings – I discussed Seth Klarman’s new position in GE-spinoff and insurer Genworth Financial (NYSE: GNW). When I wrote the article, the stock was trading for $6.31 per share and now trades at $9.03, an astounding 43.1% gain in three months!
During the most-recent November to February period, 14 out of 16 stocks highlighted were winners. More than half (9) outperformed the S&P 500′s comparable return of 11.2%. Besides Genworth, other big winners included Chuck Akre‘s Bank of America (NYSE: BAC) (36.5%) and Bill Ackman’s Fortune Brands Home & Security (NYSE: FBHS) (29.3%).
The only two losers were David Einhorn’s Market Vectors Gold Miners ETF (NYSE: GDX) (-6.8%) and Seth Klarman’s Hewlett-Packard (NYSE: HPQ) (-5.6%). Just goes to show you that mindlessly piggybacking on anybody else’s picks without doing your own research is no sure-fire way to beat the market.
Nevertheless, these quarterly SEC filings are a gold mine of information as to what the smartest investors are buying and selling. A timely review of them can make you money. With that in mind, I thought I would vet the most recent set of SEC filings to see if there are any more hidden gems ready to make big moves.
I don’t list all transactions, just ones that I personally find noteworthy. If you also have a voyeuristic streak in you, read on.
1. Seth Klarman
Company
Action
% Change in Holding
Average Purchase Price Per Share
Comments
Tronox (Other OTC: TROX.PK)
Buy
NEW
$149
Formerly bankrupt company is the world’s fifth-largest producer of titanium dioxide (TO2) whitening pigment. Impending merger with South Africa’s Exxaro Mineral Sands, which mines titanium feedstock, will create vertically-integrated TO2 powerhouse. Once merger is approved in Q2 2012, stock will move from Pink Sheets to major U.S. exchange which Klarman believes will cause the stock price to rise. So does activist shareholder Sandell Asset Management, which estimates the stock is worth between $183 and $194 per
share.
Targacept (NasdaqGS: TRGT)
Buy
NEW
$11.54
Biotech focuses on depression and Alzheimer’s and is trading below its $7.47 in cash per share. Partnering with AstraZeneca (NYSE: AZN).
Idenix Pharmaceuticals (NasdaqGM: IDIX)
Buy
126.6%
$6.49
Biotech focuses on Hepatitis-C treatment with its IDX184 drug in Phase 2 trials. Stock has skyrocketed on takeover speculation and the FDA’s Feb. 3rd decision to lift a clinical hold on IDX184.
PDL BioPharma (NasdaqGS: PDLI)
Sell
-80.8%
$6.49
Resignation of chief financial officer is never a good sign, nor is missing analyst revenue estimates.
2. David Einhorn
Company
Action
% Change in Holding
Average Purchase Price Per Share
Comments
Dell (NasdaqGS: DELL)
Buy
NEW
$15.36
Computer company has diversified into higher-margin services and has more than $8 per share in cash. Low valuation with a P/E ratio under 10.
Delphi Automotive plc (NYSE: DLPH)
Buy
NEW
$21.06
GM auto parts spinoff emerged from a four-year bankruptcy in 2009 and went public again in November 2011. Two-thirds of revenue comes from outside the U.S. The stock is a direct play on auto sale recovery and tougher fuel efficiency standards.
Xerox (NYSE: XRX)
Buy
NEW
$7.90
Document manager provider’s 2010 acquisition of Affiliated Computer Services has generated significant cost-reduction synergies and cross-selling opportunities. Between $1.0 and $1.4 billion in stock buybacks are expected in 2012. Low valuation with a P/E ratio under 10.
Travelers (NYSE: TRV)
Sell
-78.4%
$55.46
Insurance losses from several natural disasters in 2011 have caused the insurer to slow down its stock buyback program, which will reduce future earnings-per-share growth.
3. Bill Ackman
Company
Action
% Change in Holding
Average Purchase Price Per Share
Comments
Canadian Pacific Railway (NYSE: CP)
Buy
497.9%
$59.27
Ackman is engaged in a proxy fight to replace CP’s CEO with his own candidate. Freight is cheaper than sending via trucks, which is important when energy prices are high like now.
Fortune Brands Home & Security (NYSE: FBHS)
Buy
21.2%
$58.15 (combined price per share prior to Oct. spinoff)
Fortune Brands spinoff focuses on household furnishings and home security. New construction is 20% of sales while repairs and remodeling account for 35%. Not cheap, but 22% annual growth over the next five years is expected
Lowe’s Companies (NYSE: LOW)
Sell
-100%
$22.77
Strange flip-flop on this home improvement superstore. Talked very bullishly about the stock at a November investor conference but sells out shortly thereafter. Perhaps needed cash to bolster CP proxy fight.
Family Dollar Stores (NYSE: FDO)
Sell
-26.4%
$57.08
Low-end retailer is still his 7th-largest portfolio holding at 6.2%, but reduced position may reflect Ackman’s view that economy is strengthening and defensive positions are no longer likely to outperform.
4. Chuck Akre
Company
Action
% Change in Holding
Average Purchase Price Per Share
Comments
TD Ameritrade (NasdaqGS: AMTD)
Buy
136.8%
$15.95
CEO Fredric Tomcyzk says that the retail investor has regained confidence and is getting back into the market, which means higher trading commission revenue.
Ross Stores (NasdaqGS: ROST)
Buy
17.0%
$44.18
California-based discount apparel retailer has averaged earnings and dividend growth of 15% to 20% over the past 10 years. Second only to TJX Companies (NYX: TJX) in the industry. ROST is a defensive stock that will continue to do well if the economy remains weak.
Hartford Financial Services (NYSE: HIG)
Buy
102.6%
$17.38
1995 spinoff from ITT is an insurer. The stock’s price-to-book value of 0.43 is the lowest of any major insurance company. CEO Liam McGee has stated that the company may split its life and P&C operations into two separate insurance companies to unlock value.
Enstar Group (NasdaqGS: ESGR)
Buy
4.8%
$96.30
Bermuda-based insurance company recently completed selling a 19.9% interest in itself to Goldman Sachs private equity funds at $86 per share with warrants to purchase 2% more at a strike price of $115 per share. Precursor to going private?
Urgent Presentation: This is the Tipping Point
Supply and demand are on a crash course! Our food supply is at a breaking point … we’re seeing record corn and sugar prices … cotton is at a 150-year high … produce costs are skyrocketing. And it’s only going to get worse thanks to severe flooding and record droughts. Some of the smartest investors on the planet have already realized this and are pouring their money into what will undoubtedly be one of the biggest profit opportunities of the decade.
Most investors won’t catch on until it’s too late. But today is your chance to get in on the ground floor of an investment that could triple your money in the next 24 months.
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Maintaining a Canadian Edge
by David Dittman
2/23/2012
In four Flash Alerts published over the course of 10 days this month my colleague and Canadian Edge Editor Roger Conrad has provided a lengthy preview of what’s shaping up to be another impressive reporting season for the CE Portfolio. Any questions subscribers have about ARC Resources Ltd (TSX: ARX, OTC: AETUF), Cineplex Inc (TSX: CGX, OTC: CPXGF), RioCan REIT (TSX: REI-U, OTC: RIOCF) or any other of the 12 Holdings that have reported as of Thursday, Feb. 23, can be answered somewhere in this initial flurry of Alerts.
As for general impressions from what is a decent cross-section of Canadian industry, it’s clear that the abiding conservatism for which the Great White North is now widely held up as an example seems to inform decision-making all the way down at the individual-company level.
Acadian Timber Corp (TSX: ADN, OTC: ACAZF), for example, which in addition to threats to demand in key markets yet to fully rebound from the damage of 2008-09, including US housing, also suffered through an abnormally wet quarter that hampered production, was able to maintain its dividend because underlying assumptions management adopted more than a year ago have proved less rosy than reality, even as the global economy suffered through a more treacherous patch in what’s become a new normal of jagged and lumpy growth.
Management also reiterated relatively upbeat full-year guidance. Although Acadian’s payout ratio came in above 100 percent, the backing of a strong parent in Brookfield Asset Management (TSX: BAM, NYSE: BAM) and the increasingly likely return to health for some of its key markets suggests the current rate will be maintained. Beating what are right now low expectations could provide a nice lift for Acadian’s share price.
As for mainstay ARC, production was up 8.7 percent year over year and 8 percent quarter over quarter. The average realized price for its natural gas output was off by 10.4 percent, but ARC’s ever-more critical and prescient shift to liquids, along with rising production, helped the company grow funds from operations by 25.4 percent.
And Canada’s dominant movie-theater operator grew cash flow 3.2 percent despite a less-than-stellar playbill, as its imaginative efforts to diversify revenue streams and creative ways to get more of each attendee’s entertainment dollar apart from the box-office admission. Cineplex was able to overcome a 4.2 percent decline in tickets sold because media revenue rose 11.2 percent and its industry-leading efforts to install IMAX and 3D-capable screens support higher ticket prices.
Both ARC and Cineplex maintain flexible balance sheets and should have no problems navigating whatever conditions are present in credit markets in coming quarters. ARC is yielding 4.7 percent at current levels, Cineplex 4.8 percent and the riskier Acadian 7.5 percent.
Pembina Pipeline Corp (TSX: PPL, OTC: PBNPF), meanwhile, affirmed its intention to lift its monthly distribution 3.8 percent once its proposed merger with Provident Energy Ltd (TSX: PVE, NYSE: PVX) closes, which should happen soon after Mar. 29 shareholder votes for both companies.
Pembina’s full-year adjusted cash flow from operating activities was up 15.6 percent from 2010 levels on solid contributions from Midstream & Marketing, Oil Sands Transportation and Gas Services, which offset softer results from Conventional Pipelines. The company continues to add productive assets on efficient terms, building wealth for investors in the process.
It’s currently yielding 5.5 percent, with reliable growth assured by CAD526 million in capital expenditures in 2011 and another CAD550 million on tap for 2012–accounting that doesn’t include the Provident merger.
You may want to use a “buy limit” order to establish your position in Pembina Pipeline; at current levels, as of the close of North American trading Feb. 23, 2012, the stock is priced a bit beyond its CE “buy-under” target. A “buy limit” order is an order to purchase a security at or below a specified price. It allows you to specify the price you’re willing to pay for a stock.
You’re guaranteed to pay your “buy limit” price or better if your order is filled. But there’s no guarantee your specified price will be met.
We’re not traders, however, and should a price rise and stay above a target we’ll either adjust according to the dividend growth that justifies it or else avoid it because the market is simply in love with a story. At any rate, please consult the Canadian Edge Portfolio and How They Rate tables for up-to-date advice.
Long-Term Outperformance Is Simple
The conservatism Canada’s lauded for could well have been called “simplicity” by the same folks who nominated the country for honorary “Third World” status way back in the early 1990s, when the debt-to-gross domestic product (GDP) ratio in the Great White North was in the neighborhood of triple digits and “socialism” threatened the breakdown of the whole misbegotten enterprise.
What allowed Canada to turn the corner, the things people are commending to others who now face their own dire straits, is a pretty basic combination: a well-educated and productive citizenry that pays its taxes.
Australia Reinvents Cloud Computing
An Australian telecommunications company is currently launching the most ambitious cloud-computing platform in the world. Their client list is growing as fast as their broadband network. The timing is urgent.
There’s also a 9% dividend…
Asset Allocation for a New Demographic Destiny
by Yiannis G. Mostrous
2/23/2012
In recent months, the US unemployment rate has fallen at a faster pace than most economists had predicted. Just a few months ago, unemployment was forecast to be close to nine percent this year. And the usual perma-bears and assorted sensationalists were even calling for the demise of the US economy.
The latter perspective should not be taken seriously since these parties rarely change their outlook. The real issue is the extent to which US economic growth is sustainable and can continue to create new jobs.
It can be difficult to assess the US economy’s prospects for continued growth because the majority of commentators and economists continue to analyze the economy by applying the same criteria they’ve used in the past. In other words, the operating assumption is that gross domestic product (GDP) growth will eventually revert to its long-term average of 3.5 percent.
Unfortunately, the US will take a long time, if ever, to achieve sustainable long-term GDP growth of 3.5 percent because a massive deleveraging process is underway. Indeed, the credit expansion that fueled growth in the past is still being reversed. Furthermore, the Great Recession was the first one in over 60 years to hit consumers directly by significantly devaluing the key source of their wealth–the homes that they own.
As has been the case in the wake of every major financial and economic crisis, there is general confusion with regard to the best path toward future economic growth. Meanwhile, investor psychology is also adjusting to the new reality. Investors are increasingly willing to forego the staggering gains of yesteryear in favor of lower, steadier returns.
The latter attitude has been reinforced by demographics. Now that the Baby Boomer generation is in its first wave of retirements, it could be just as influential on investing as it has been on all other aspects of American culture. After all, this generation was the driving force behind US economic growth for the last 30 years. Its sheer size ensured that as Baby Boomers grew professionally and financially, so did the nation’s economy.
As subsequent waves of Baby Boomers enter retirement, the US economy will necessarily adjust to the new demographic reality. Aging Baby Boomers will demand greater stability and income along with an increase in the size of government to cater to their needs.
Despite their differing political philosophies, both the Bush and Obama administrations succeeded in greatly expanding the federal government. That trend toward bigger government will be difficult to reverse regardless of the outcome of the current election cycle.
Given these considerations, the US economy’s long-term growth rate will likely be lower than the 3.5 percent annual growth it enjoyed historically. As such, growth expectations and projections will reset accordingly. Note that as recently as 2009, government agencies were projecting the US economy would grow by 4 percent annually between 2010 and 2012. Of course, the reality turned out to be far different.
One of the consequences of the most recent financial crisis is that the majority of developed economies have entered a long period of slow growth. Once investors understand this new reality, they can recalibrate their approach to asset allocation.
Recession-Proof Stocks to Buy Now
In times like this, you want to own stocks that have an irrefutable, unstoppable reason to go up – and go up fast – as soon as the dust settles from this market correction. I want to tell you about a handful of stocks that are destined to double – perhaps even triple – your moeny in the next 24 months thanks to one of the biggest supply and demand squeezes in history!
No matter what happens to the markets or the world economy, people need to eat. We are already struggling to feed a growing population, and things are about to get much worse. Our food supply is at a breaking point … we’re seeing record corn and sugar prices … cotton is at a 150-year high … produce costs are skyrocketing. And it’s only going to get worse with more than 1 MILLION square miles of farmland facing extreme drought. This will undoubtedly be one of the biggest profit opportunities of the decade. Don’t miss your chance to get in at rock-bottom prices!
Just click here to watch this urgent presentation now.
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Source: Superstar Investors Buys and Sells on STOCK MARKET INVESTMENT - Stock Market Investment Ideas