Here's What This $60 Billion Manager Has Been Buying
Sep 5th 2013 10:33PM
Updated Sep 5th 2013 10:34PM
Every quarter, many money managers have to disclose what they've bought and sold, via "13F" filings. Their latest moves can shine a bright light on smart stock picks.
Today, let's look at Barrow, Hanley, Mewhinney & Strauss, founded in 1979, and one of the biggest value-focused institutional investment companies around. According to the folks at GuruFocus.com, over the 15 years ending in 2012, Barrow, Hanley racked up a cumulative gain of 143%, compared with just 94% for the S&P 500. Its massive large-cap value equity fund trailed the S&P 500 over the past year, but beat it over the past decade.
The company aims to invest via portfolios that maintain below-average price-to-earnings (P/E) ratios, below-average price-to-book ratios, and above-market-average dividend yields. It also tends to focus on large-cap companies.
The company's reportable stock portfolio totaled $59.5 billion in value as of June 30, 2013.
So what does Barrow, Hanley's latest quarterly 13F filing tell us? Here are a few interesting details:
The biggest new holdings are General Dynamics and First Niagara Financial . Other new holdings of interest include Photronics . First Niagara, yielding 3.2%, has more than tripled its asset base since the financial crisis, though it has significantly increased its share count to do so. Meanwhile, it has been managing its credit risk well, which is kind of important for a banking enterprise. And when interest rates rise, as they should eventually do, First Niagara will benefit.
Photronics, specializing in photomasks that are used in the semiconductor industry, got whacked after posting disappointing results for its second quarter. Its third quarter was better, meeting earnings expectations and exceeding revenue estimates. Management pointed out a delay in designing new products -- for kind of good reasons: "Our customers extended manufacturing of current chips creating a pause in demand for new photomasks. We expect new design in memory to start up again during the current year."
Among holdings in which Barrow, Hanley increased its stake were Occidental Petroleum and Emerson Electric . Occidental recently reported a rather flat second quarter, and some have been waiting for the company to break itself up. The company has been improving its performance on several measures lately, though, such as revenue and earnings growth. Dividend growth has also been solid. On the negative side, profit margins have shrunk, while debt has grown. For patient investors, the stock offers a 2.9% yield. Bulls expect production growth from its mature oil assets.
Emerson Electric, recently yielding 2.7%, has been benefiting from its expansions abroad, in regions that are growing more rapidly than the U.S. Still, its last quarter featured revenue down about 2%, and management tempering expectations. Earnings came in below estimates. Management noted weak government spending, but some stabilization in Europe. Emerson is selling much of its computing and power business to Platinum Equity.
Barrow, Hanley reduced its stake in lots of companies, including Sysco . Sysco is a giant in food delivery to restaurants and other institutions, and recently yielded 3.5%. It recently reported quarterly revenue up 5%, but earnings down 8.5%. On the plus side, management announced a 20-million-share buyback plan. Sysco has won some military contracts, and has generally weathered recent years with our weak economy, but it does face competition. A significant ray of hope is Sysco's international expansion.
Finally, Barrow, Hanley's biggest closed positions included Duff & Phelps and Cognex. Other closed positions of interest include Gentex.
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. Therefore, 13-F forms can be great places to find intriguing candidates for our portfolios.
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The article Here's What This $60 Billion Manager Has Been Buying originally appeared on Fool.com.Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter, owns shares of Emerson Electric Co. The Motley Fool recommends Cognex, Emerson Electric Co., Gentex, and Sysco. The Motley Fool owns shares of General Dynamics and Gentex. 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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