Every quarter, fund 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 Ruane, Cunniff, & Goldfarb, founded by the late William Ruane, like Warren Buffett a student of value investing giant Benjamin Graham. Ruane founded the Sequoia (SEQUX) mutual fund in 1970, and its performance will show you why you might want to pay attention to the fund company's investments: Since inception and through 2011, the fund gained a cumulative 24,900%, versus 5,800% for the S&P 500. Annualized, that's 14% versus 10%. Over the past decade, which has been a challenging one for the stock market, Sequoia averaged 5.6% annually, versus 2.9% for the S&P 500.
Ruane, Cunniff, & Goldfarb's overall portfolio (which may contain holdings other than those of the flagship Sequoia fund) totaled $11.5 billion in value as of Dec. 31, 2011. The company's top three holdings, representing about 35% of its total asset value, were Valeant Pharmaceuticals, Berkshire Hathaway, and TJX.
So what does Ruane, Cunniff, & Goldfarb's latest quarterly 13F filing tell us? Here are a few interesting details:
New holdings include Netflix (NAS: NFLX) and Sohu.com (NAS: SOHU) . The company is likely seeing Netflix as attractively priced at recent levels, since it has fallen sharply over the past few months. The stock does have plenty of fans, but bears make some compelling points, too, such as Amazon.com's threatening encroachment -- not to mention other potential, major competitors. Even the confusion over the U.S. Postal Service's future is a threat to the company.
Sohu has attracted many comers, operating a rapidly growing, online business based in populous China. But it's volatile, too, as demonstrated by a recent 15% drop when its management lowered expectations. The company is debt-free and has ample cash, and has diverse operations, such as online gaming, search, browsers, mobile communications, and more.
Among holdings in which Ruane, Cunniff, & Goldfarb increased its stake was Praxair, specializing in industrial gases, coatings, and more. It has investors divided over its decision to issue debt to buy back shares. Reducing the share count can enrich existing shareholders, but with the stock seeming fairly valued and possibly a little ahead of itself, shares being bought don't seem to be bargains. Unambiguously in the company's plus column are its growing dividend and its big backlog of orders.
Ruane, Cunniff, & Goldfarb reduced its stake in a lot of companies, including Walgreen (NYS: WAG) . Once a bit of a stock market darling, the stock took a big hit when Walgreen broke up its partnership with Express Scripts, losing many customers and dollars in the process. It jumped recently, though, but only on rumors -- that it might gobble up ailing competitor Rite-Aid (NYS: RAD) . Rite-Aid is No. 3 in drugstores, and Walgreen is the top dog. It's generally not smart to invest based on rumors, but if this deal materializes, it could make a big difference for Walgreen, as Rite-Aid rings up more than $25 billion annually.
Finally, Ruane, Cunniff, & Goldfarb unloaded several companies entirely, such as Akamai (NAS: AKAM) , which specializes in online content delivery and cloud computing infrastructure. Many lost faith in the company over the past year, as competitors did well and Akamai's profit margins shrank. But the company seems to be turning itself around, enough to lift its stock some 40% over the past few months.
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.
If you're looking to build long-term security with stocks, check out our special free report, 3 Stocks That Will Help You Retire Rich. You'll learn more about two companies mentioned in this article, and will meet a third compelling candidate for your portfolio.
At the time thisarticle was published LongtimeFool contributorSelena Maranjian,whom you canfollow on Twitter, owns shares of Netflix, Berkshire Hathaway, and Amazon.com, but she holds no other position in any company mentioned.Click hereto see her holdings and a short bio. The Motley Fool owns shares of Berkshire Hathaway and Amazon.com.Motley Fool newsletter serviceshave recommended buying shares of Netflix, Berkshire Hathaway, Amazon.com, and Sohu.com. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
Copyright © 1995 - 2012 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.