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 Whitney Tilson (a former Fool writer) and Glenn Tongue, who founded T2 Partners in 2004. Tilson has been dubbed "the best investor you've never heard of" and is known for his contrarianism, his dedication to value investing, and his respect for Warren Buffett and Charlie Munger.
Why should you care about T2 Partners' moves? Well, because while its performance has been volatile, its managers have posted some strong numbers in the past, and if you believe in the power of contrarian plays and value investing, they stand a good chance of doing so again. In their year-end letter to investors for 2011, Tilson and Tongue note that their total return since inception (in 1999) has been 114%, versus 29% for the S&P 500.
The reported T2 stock portfolio totaled about $345 million in value as of March 31, 2012, with 69 holdings.
So what does the latest T2 quarterly 13-F filing tell us? Here are a few interesting details:
New holdings include Vonage (NYS: VG) . These days the company is serving as an object lesson for those who drooled at Facebook's IPO, since Vonage shares opened around $17 per share and now trade below $2. Still, the stock has fallen so far that some now see it as attractively priced. Many want to see an improved marketing plan to help it attract more customers, and the company has been addressing that.
T2 boosted its long position in BerkshireHathaway, the diverse behemoth run by Warren Buffett, by using call options. Tilson and Tongue have frequently spoken highly of Buffett and Berkshire. In an April communication to investors, Tongue noted:
We value Berkshire stock and we think it's worth about $180,000 per share. We were buying Berkshire stock today very aggressively in the marketplace. It's got the most powerful balance sheet of any company in America and it's got earnings power that is growing very, very rapidly.
Tilson explained, "For more than 50 years, Buffett has proven beyond a shadow of a doubt that he can consistently: a) take $1 of cash and invest it to create far more than $1 of value; and b) pick stocks that go up and beat the market."
T2 reduced its stake in lots of companies, including, perhaps surprisingly, Apple (NAS: AAPL) . Tilson recalls considering investing in Apple back in 2000, when its market cap was around $7 billion (it's north of $500 billion recently), and deciding to pass. Today plenty of people still find the stock undervalued, but some do worry about how well Tim Cook will be able to lead the company, and about competition from the Android system rivals such as Microsoft.
The company also decreased its stakes in Netflix (NAS: NFLX) and SanDisk (NAS: SNDK) . Late last year, Tilson explained, "We're long Netflix because we think the bad news is out, we like the company's balance sheet and cash flows, and see few red flags." He also mentioned the company's low valuation making it a possible acquisition target, and its management's quick response to mistakes made. While some worry that Netflix's subscribership is shrinking, Tilson sees mere seasonal weakness and has been pleased with recent results.
SanDisk recently reported disappointing earnings and warned of lowered expectations as well. Tilson is waiting for more information, to see if the company's problems are short-term or long-term. Some, like, my colleague Anders Bylund, though, see the stock as oversold, expecting various catalysts, such as the continuing explosive growth of smartphones, to fuel further growth for memory makers such as SanDisk.
Finally, T2 unloaded several companies, such as Seagate Technology (NAS: STX) . Last year Tilson was unloading some shares of Seagate to buy into rival Western Digital, but as of the latest quarter, both companies have exited the portfolio. Seagate fans have recently been excited by the company's newest technology, which may boost memory storage by more than 50%.
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. 13-F forms can be great places to find intriguing candidates for our portfolios.
If you're drawn to stocks like Seagate that offer new technologies and services with blockbuster potential, check out our special free report: "Forget Facebook -- Here's the Tech IPO You Should Be Buying."
At the time thisarticle was published Longtime Fool contributorSelena Maranjian, whom you canfollow on Twitter, owns shares of Berkshire Hathaway, Microsoft, Netflix, and Apple, 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 Western Digital, Microsoft, Berkshire Hathaway, Apple, and Netflix.Motley Fool newsletter serviceshave recommended buying shares of Microsoft, Berkshire Hathaway, Netflix, and Apple, as well as creating bull call spread positions in Apple and Microsoft. The Motley Fool has adisclosure policy.We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.
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