Here's What the Best-Performing Hedge Fund Has Been Buying
Nov 25th 2012 1:57PM
Updated Nov 25th 2012 1:58PM
Every quarter, many money managers have to disclose what they've bought and sold, via "13-F" filings. Their latest moves can shine a bright light on smart stock picks.
Today let's look at Bridgewater Associates, one of the world's largest hedge fund companies -- and, in 2010 and 2011, running the best-performing hedge fund as well. Bridgewater was founded by Ray Dalio, who focuses on macroeconomic factors as he makes his investment decisions -- factors such as inflation, currency exchange rates, and GDP growth. He's clearly rather skilled, as the size of Bridgewater attests.
It can be hard to find sufficient promising places to park your money, when you have so many billions to invest, but Bridgewater partly solves that problem with index funds, recently holding about 35% of its value in the S&P 500 SDPR ETF and 28% in the Vanguard Emerging Markets Stock ETF. The company's reportable stock portfolio totaled $7.4 billion in value as of Sept. 30, 2012.
So what does Bridgewater Associates' latest quarterly 13-F filing tell us? Well, that most of its money is in index funds and not individual stocks. Still, it does own several hundred stocks. Here are a few interesting stocks bought and sold.
The biggest new holdings are Berkshire Hathaway (NYS: BRK.B) and BCE (NYS: BCE) . Other new holdings of interest include Brocade Communications Systems (NAS: BRCD) and Exelon (NYS: EXC) . Brocade Communications has been outperforming analyst estimates and buying back shares. Its CEO is departing, and while some are waiting to see who will helm the company next, others are hoping that the company will be acquired -- with IBM (NYS: IBM) and EMC (NYS: EMC) among those suggested as logical suitors. The company's growth rate has been shrinking in recent years, worrying some investors, but others are very hopeful about its growing involvement in cloud computing.
Exelon, America's largest nuclear-power company, is also involved in more traditional energy-generation businesses. It's trading near a 52-week low, suffering in part because of the relatively high cost of nuclear energy in an environment of very low gas prices. The current situation won't last forever, though, and for patient investors, the stock recently yielded a hefty 7.4%. It carries a lighter debt load than many peers, as well, and is expanding into solar and wind power.
Among holdings in which Bridgewater Associates increased its stake was Corning (NYS: GLW) , which has seen its stock price shrink over the past few years. The company hasn't been standing still, though. Its Gorilla Glass has been very successful, now embedded in millions of mobile devices, and its new Willow Glass is exciting, too, as it's flexible. Weak demand for its LCD offerings has hurt Corning, but the company is a major fiber provider for growing networks, its revenue growth is picking up, and patient investors can collect a 3.2% dividend yield.
Bridgewater Associates reduced its stake in lots of companies, including Cliffs Natural Resources (NYS: CLF) . Cliffs recently yielded 8%, but the stock has plunged over the past year, partly because of low iron ore prices. Indeed, the stock took another hit recently on news that Cliffs is shutting down some U.S. operations and delaying an expansion at a Canadian iron ore mine. Still, some like its prospects, especially once the auto industry and others are recovering more strongly, as Cliffs' metallurgical coal is used in making steel. Some recent good news is China's plan to spend some $156 billion beefing up its infrastructure, which will certainly spur demand for coal.
Finally, Bridgewater Associates' biggest closed positions included Best Buy (NYS: BBY) and Symantec (NAS: SYMC) . Other closed positions of interest include longtime Intel (NAS: INTC) rival Advanced Micro Devices (NYS: AMD) . AMD recently announced plans to lay off 15% of its workforce, and many of its financial stats are not encouraging. Some speculate that it could end up being acquired. (It's not smart to base investment decisions on buyout rumors, though.)
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 13-F forms can be great places to find intriguing candidates for our portfolios.
The article Here's What the Best-Performing Hedge Fund Has Been Buying originally appeared on Fool.com.Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter, owns shares of Berkshire Hathaway, Cliffs Natural Resources, Corning, and Intel. The Motley Fool owns shares of Best Buy, Berkshire Hathaway, EMC, Corning, IBM, and Intel. Motley Fool newsletter services recommend Best Buy, Berkshire Hathaway, Exelon, Corning, IBM, and Intel. Try any of our Foolish newsletter services free for 30 days. We Fools don't 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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