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 hedge funds that 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
Bill Ackman founded Pershing Square Capital Management in 2003. An investor with roots in real estate, Ackman is an activist, often advocating strongly for big changes at companies in which he has invested heavily. Soon after Ackman invested in the Fortune Brands (NYS: FO) conglomerate, for example, the company began looking to spin off various divisions.

Why should you look at Pershing Square Capital Management's moves? According to AlphaClone's back-test simulation, anyone who invested in Pershing Square Capital Management's 10 largest long positions at the time they were disclosed publicly each quarter would have returned 27.8% since 2006, versus just 3.2% for the S&P 500 (including dividends) and 3.5% for the Dow Jones Industrial Average (INDEX: ^DJI) as of Sept. 2.

The total market value of Pershing Square Capital Management's disclosed equity holdings as of June 30, 2011 -- the latest quarter for which data is available -- was $6.4 billion across only nine holdings. (Fairholme Capital Management's Bruce Berkowitz is considered a very focused investor, yet his company had 20 holdings recently, more than twice Pershing's.) Pershing's positions and associated changes in number of shares held as of June 30, 2011 were:

J.C. Penney (NYS: JCP)  -- increased 10.9%.
General Growth Properties (NYS: GGP)  -- increased 0.6%.
Fortune Brands -- increased 3%.
Citigroup (NYS: C)  -- increased 60.3%.*
Kraft Foods (NYS: KFT)  -- unchanged.
Family Dollar Stores (NYS: FDO)  -- new.
Howard Hughes (NYS: HHC)  -- unchanged.
Alexander & Baldwin (NYS: ALEX)  -- unchanged.
Greenlight Capital (NAS: GLRE)  -- unchanged.

Source: AlphaClone.
* Citigroup holdings adjusted to reflect 1-for-10 reverse split.

During the quarter, Pershing Square sold out of Corrections Corp. of America (NYS: CXW) entirely. While many investors bullishly expect more states to privatize their prison systems, others have their doubts. During this past quarter, many shareholders sold when the company announced that though it was beefing up its share buyback program, it would stretch that initiative out, spending less on it each year.

Selected Q2 2011 commentary
Pershing Square Capital Management has more than half of its assets in the services sector, and 17% in conglomerates -- nearly twice its level from a few quarters ago.

Here's where the firm is winning, currently, and making new bets at present:

Recent winner
Kraft Foods was a big winner in the quarter, rising about 12%. The company has been posting impressive growth rates internationally, such as in India, China, and Indonesia, as its products such as Oreos find new fans abroad. It's also splitting itself in two, separating its snacks and groceries businesses. The company has a four-star (out of five stars) rating at Motley Fool CAPS.

Recent loser
Real estate development company Howard Hughes didn't do so well, with Pershing's stake dropping in value by about 8% during the quarter. The stock has since fallen further, as the company and its collection of troubled properties reported lackluster earnings. Ackman and Brookfield Asset Management (NYS: BAM) brought General Growth Properties out of bankruptcy, spinning off Howard Hughes and investing in it, along with Fairholme.

New bets
The new addition to the portfolio, Family Dollar, comprises 9.1% of the total portfolio. It has drawn interest due to its rising growth rates and its expansion as it opens many new locations. The persistently poor economy has also fueled its business, driving more people to seek the lowest prices they can find. It has believers among the Motley Fool CAPS community, sporting a four-out-of-five star rating.

We should never blindly copy any investor's moves, no matter how talented that investor. But it can be useful to keep an eye on what smart folks are doing. 13-F forms can be great places to find intriguing candidates for our portfolios.

Have any thoughts on this fund company or its holdings? Leave a comment below!

At the time this article was published Longtime Fool contributor Selena Maranjian holds no position in any company mentioned. Click hereto see her holdings and a short bio. The Motley Fool owns shares of The Howard Hughes, Fortune Brands, and Citigroup. Motley Fool newsletter services have recommended buying shares of Brookfield Asset Management, Corrections Corporation of America, and Fortune Brands. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.

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