by Tim Melvin | November 14, 2013 4:59 pm
I love when 13F filings start pouring into the SEC. Being able to track the buying and selling activity of the best money managers and hedge funds is like having the world’s greatest research department at no cost.
I’m pretty good at finding ideas, but having the best value and distressed investors reveal their holdings every three months is a great way to find ideas and values you might have skipped over. By reviewing actual portfolios instead of just listening to what might be said in the media, we can see what managers really think and which opinions they are willing to back with real money.
It’s one of the greatest resources available to investors.
As I compared this quarter’s filing to the positions held at the end of Q2, one glaring fact emerged from the data: Many of the value mangers I follow were doing a lot more selling than buying in the third quarter. I have a tendency to follow the old guys who have been around for a few market cycles, and the fact that they’re selling tells us that the market might be overvalued.
Tweedy Browne started out as one of Ben Graham’s brokers and has been at the forefront of value investing ever since. I have enormous respect for the firm, and have stolen an enormous amount of fantastic ideas from it. Tweedy Browne only made three buys in the quarter, adding to Banco Santander Brasil (BSBR) and National Oilwell Varco (NOV) as well as opening a very small stake in Connecticut Water Service (CTWS). The firm reduced or sold seven positions over the summer, slashing stakes in Mastercard (MA) and Phillips 66 (PSX) by more than 40% and totally exiting Arthur J. Gallagher (AJG) and Sysco Corporation (SYY).
Seth Klarman of Baupost Funds is one of the most successful investors of the past couple of decades. He bought one stock in the quarter — shares of PBF Energy (PBF). The stock is cheap, trading at just 70% of book value and worth a deeper look. However, Klarman also completely exited large positions in companies like AIG (AIG) , BP (BP), Yaman Gold (AUY), Kinross Gold (KGC) and Pretium Resources (PVG). Comparing the buys and sells, the fund appears to have increased its already large cash holdings.
The list of net sellers is filled with some impressive names. Robert Olstein bought an impressive 23 stocks in the quarter, but he sold 37 stocks in the same time period. Donald Smith is an experienced deep value investor, and while he bought 13 new stocks over the summer, he also sold 26 names from his portfolio. Michael Price bought 13 stocks in the quarter, but sold all or part of 30 positions in his fund.
The old, experienced smart money appears to be taking money off the table at current levels. Perhaps you should be doing the same.
As of this writing, Tim Melvin was long BSBR.
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