Here's What This 178% Gainer Is Buying

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Every quarter, many money managers have to disclose what they've bought and sold. Their latest moves can shine a bright light on smart stock picks.

Today, let's look at Barrow, Hanley, Mewhinney & Strauss, one of the biggest value-focused institutional investment companies around, with more than $46 billion in assets as of Dec. 31, 2011. According to the folks at GuruFocus.com, over the 15 years ended in 2011, Barrow, Hanley racked up a cumulative gain of 178%, compared with just 120% for the S&P 500.

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 top holdings as of the end of 2011 were Philip Morris International, ConocoPhillips, and Occidental Petroleum.

Interesting developments
So what does Barrow, Hanley's latest quarterly 13F filing tell us? Here are a few interesting details:

New holdings include Embraer (NYS: ERJ) , a Brazil-based aircraft manufacturer. The company cranks out a lot of regional and business jets and took a hit this past year due to customer American Airlines filing for bankruptcy protection. It also makes bigger commercial jets and recently won a $1 billion fighter jet contract from the Pentagon, though that deal is being delayed by a lawsuit from the bid-losing company, Hawker Beechcraft.

Among holdings in which Barrow, Hanley increased its stake were Walgreen (NYS: WAG) and Teva Pharmaceutical (NAS: TEVA) . Walgreen has struggled mightily recently, losing many customers after it broke up with partner Express Scripts. But speculation that it might buy beleaguered rival Rite Aid has many investors intrigued. Such an acquisition could result in more than $500 million in savings, but many Rite Aid stores would require costly upgrades and many Rite Aid workers are unionized, which would introduce labor negotiations to Walgreen. Teva, meanwhile, has reported some good news, in its launch of the generic version of AstraZeneca's Seroquel and its new allergy spray QNASL receiving FDA approval. In addition, many blockbuster drugs are coming off their patent protections in the near future, and that bodes well for generic specialist Teva.

Barrow, Hanley reduced its stake in a lot of companies, including food distribution giant Sysco (NYS: SYY) , which has struggled in our lackluster economy; but, as the recovery takes hold, more people will be dining in restaurants, boosting Sysco's fortunes. Rising food prices may be a problem, but Sysco remains dominant in its field, and rewards shareholders with an attractive dividend, recently yielding 3.6%.

Finally, Barrow, Hanley unloaded several companies, such as aluminum titan Alcoa (NYS: AA) . The company is shrinking its capacity and recently reported some disappointing results, but its long-term outlook seems sound, as aluminum will continue to be in demand. Of course, the price of aluminum will drive Alcoa's profits, and recent high supply is what led to the company cutting back on its production.

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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.

At the time this article was published

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