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 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
With a name that evokes the old adage that successful investing is more of a marathon than a sprint, Marathon Asset Management LLP was founded in 1986 by William Arah, Jeremy Hosking, and Neil Ostrer. Based in London, it specializes in contrarian investments, studying companies' managements closely.
Why should you look at Marathon Asset Management's moves? According to AlphaClone's back-test simulation, anyone who invested in Marathon Asset Management's 10 largest long positions (in equal portions) at the time they were disclosed publicly each quarter would have returned 289.1% since 2000, versus 3.6% for the S&P 500 (including dividends) as of Sept. 16. Note that this data reflects the holdings of Marathon Asset Management LLP, and not necessarily any related Marathon fund.)
The total market value of Marathon Asset Management's disclosed equity holdings as of June 30, 2011 -- the latest quarter for which data is available -- was $8.48 billion across 103 holdings. The company's 10 largest positions and associated changes in number of shares held as of June 30, 2011 were:
Cablevision Systems (NYS: CVC) -- reduced 0.5%.
Rogers Communications (NYS: RCI) -- reduced 0.5%.
Amazon.com (NAS: AMZN) -- reduced 0.5%.
Costco (NAS: COST) -- reduced 0.5%.
Liberty Global (NYS: LBTYA) -- reduced 0.5%.
Kansas City Southern (NYS: KSU) -- reduced 0.5%.
Berkshire Hathaway (NYS: BRK.B) -- reduced 0.5%.
SL Green Realty (NYS: SLG) -- reduced 0.6%.
Priceline.com (NAS: PCLN) -- reduced 13.3%.
Gartner (NYS: IT) -- reduced 16.9%.
Given Marathon's interest in management quality, it's not surprising to see companies such as Costco and Berkshire Hathaway included in the top holdings, as their CEOs, Jim Sinegal and Warren Buffett, respectively, are extremely well regarded. (Sinegal is stepping down, though, and Buffett, 81, is bringing possible successors into his fold.)
During the quarter, Marathon also increased its position in Kroger and Bank of America, among others. Among the dozens of stocks that it reduced its exposure to were Cincinnati Bell, Discovery Communications, and Citigroup.
Selected Q2 2011 commentary
Marathon Asset Management has more than 53% of its assets in the services sector, with financials and technology comprising another 17% and 7% of the portfolio, respectively. Financials have inched up and technology has inched down in recent quarters. That certainly reflects a little contrarianism, as many are skittish about banks these days, while lots of technology stocks look like bargains.
Here's where the firm is winning and losing currently and making new bets:
Level 3 Communications (NAS: LVLT) was a big winner for Marathon during the quarter, surging 66%. Many investors are torn about this stock -- it has been posting some promising numbers, but its heavy debt load has been growing, and the value of its merger with unprofitable Global Crossing remains to be seen. Still, its agreement to facilitate much of Netflix's streaming content bodes well. The company has a three-star (out of five stars) rating at Motley Fool CAPS.
Blue Nile didn't do as well for Marathon, dropping 19% during the quarter. Its online jewelry retailing model worked well for a long time, with its low overhead costs giving it competitive advantages. But rising commodity costs have overshadowed that lately. The company has a two-star rating in Motley Fool CAPS.
One of Marathon's largest new additions is Huntington Bancorp (NAS: HBAN) , which has repaid its TARP money and has been reducing its percentage of nonperforming loans. In a big show of confidence, it also recently quadrupled its dividend. The company has a two-star rating in Motley Fool CAPS.
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.
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At the time thisarticle was published Longtime Fool contributorSelena Maranjianowns shares of Costco and Netflix, but she holds no other position in any company mentioned. Check out herholdings and a short bio. The Motley Fool owns shares of Huntington Bancshares, Citigroup, Berkshire Hathaway, Bank of America, and Costco.Motley Fool newsletter serviceshave recommended buying shares of Costco, Rogers Communications, Berkshire Hathaway, Amazon.com, Discovery Communications, priceline.com, and Netflix, as well as buying puts in Netflix. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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