Here's What This $3 Billion Smaller-Company Specialist Has Been Buying
Nov 7th 2013 9:35PM
Updated Nov 7th 2013 9:36PM
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 Stephens Investment Management Group, founded in 1933 by W. R. Witt Stephens, and helmed by his nephew, Warren A. Stephens, today. Based in Little rock, Arkansas, the company prides itself on long-tenured and respected analysts who develop deep expertise in their respective industries. Stephens also has a private-equity portfolio focused on high-margin, cash-flow-producing businesses, and is a wealth manager, too, among other things. Its stock investments favor small- to medium-sized growth companies.
The company's reportable stock portfolio totaled $2.9 billion in value as of September 30, 2013.
So what does Stephens' latest quarterly 13F filing tell us? Here are a few interesting details:
The biggest new holdings are DreamWorks Animation SKG and The Bancorp. Other new holdings of interest include 3D Systems and Applied Materials . 3-D printing specialist 3D Systems has seen its stock surge some 140% over the past year, with some speculating that it might be acquired. Its industry holds much promise, and 3D is already delivering big growth numbers in its third quarter, though also tempering near-term expectations. The company's products serve industry as well as consumers, and it recently bought The Sugar Lab, a company developing printable food. 3D is significantly shorted, with some bears worried about Hewlett-Packard's entry into the market.
Applied Materials yields 2.3%, which includes a 10% dividend hike earlier this year. The company is buying Tokyo Electron, which should reduce costs, expand its geographic footprint, and make it even more of a powerhouse in chip equipment. (Investors might want to wait until the deal is actually done before counting chickens, though.) Bulls expect Applied Materials to benefit from an increase in semiconductor demand globally, but bears worry about weakness in the PC market. Its third quarter, reported in August, featured $2 billion in new orders, but that was 12% below the previous quarter's levels. In September, the company's CFO noted to analysts that, "The real driver of the revenue line will be the share gains of new products in the next couple of years."
Among holdings in which Stephens Investment Management increased its stake were Cree and Halcon Resources . LED lighting specialist Cree took a hit, following a quarterly earnings report that featured big, double-digit revenue and earnings growth, but also lowered near-term projections from management. Bulls like Cree's long-term prospects, with the LED market expected to grow by about 34% annually over the next few years, eventually totaling nearly $100 billion. Meanwhile, Cree's bulbs have received an Energy Star rating that will permit them to qualify for rebates from utility companies, and it has a promising partnership with Home Depot, too. Still, the stock's price seems a bit steep lately, giving Cree little room for error.
Halcon Resources is a promising oil and gas company, operating in the lucrative Bakken region and elsewhere, such as in Texas. Halcom stock is down about 20% over the past year, and trading near its 52-week low, with shares even dipping below book value. It has been growing rapidly (in its last quarter, revenue surged 316%, and production 237%), but it also carries significant debt. Halcon has been successfully tweaking its operating processes in order to boost production.
Stephens Investment Management reduced its stake in companies such as Telsa Motors , the electric car company, whose shares have more than quadrupled over the past year, but are down 28% from their all-time high just a few weeks ago. In today's news, a third Model S Tesla vehicle caught fire, with all of the incidents apparently involving accidents, not spontaneous combustion. The shares have also declined as Tesla struggles to keep up with demand, but bulls see the company outperforming its own expectations, and like its long-term prospects. The Model S was rated as practically perfect by Consumer Reports earlier this year.
Finally, Stephens' biggest closed positions included Sourcefire, which has been bought by Cisco Systems, and agriculture and retail specialist The Andersons.
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 $3 Billion Smaller-Company Specialist Has Been Buying originally appeared on Fool.com.Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter, owns no position in any stocks mentioned. The Motley Fool recommends 3D Systems, Cisco Systems, DreamWorks Animation, Home Depot, and Tesla Motors. The Motley Fool owns shares of 3D Systems and Tesla Motors and has the following options: short January 2014 $20 puts on 3D Systems. 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.