Here's What This $50 Billion Pension Fund Has Been Buying
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 the California Public Employees Retirement System (often referred to as CalPERS), one of the most prominent and biggest pension funds. It serves more than 1.6 million public employees, retirees, and their families.
The company's reportable stock portfolio totaled $49.8 billion in value as of June 30, 2013. Fifty-two percent of its investment portfolio was recently in public equity, with 12% in private equity, 16% in income investments, and 8% in real estate, among other categories.
So what does CalPERS' latest quarterly 13F filing tell us? Here are a few interesting details:
The biggest new holdings are AmerisourceBergen and L Brands. Other new holdings of interest include Northern Tier Energy, LP and Pinnacle Foods . Northern Tier is a relatively newly public oil refiner that yields (you might want to sit down)... 20.5%. Such a high yield can be a sign of trouble, but the company's revenue, earnings, and free cash flow have all been growing. Among other activities, Northern Tier operates more than 160 convenience stores and a bakery that supplies them. All is not perfect, though, as the company's dividend payout has actually been shrinking over the past few years, and much of its performance depends on a single refinery. It's also riskier than many other MLPs, as its payouts are less certain. Northern Tier reports its second-quarter results next week, and last quarter saw it swing to a profit from a loss the previous year.
Pinnacle Foods is a recent IPO with a new dividend, which yields about 2.8%. The company has a significant debt load, but it also has a strong brand line-up. Its brands include Birds Eye, Aunt Jemima, Hungry-Man, Van de Kamp's, Armour, Lender's, Mrs. Paul's, Vlasic, Log Cabin, Mrs. Butterworth, and Duncan Hines, among others. Pinnacle's last quarter featured revenue down a smidge, but earnings up, helped by cost-cutting. It, too, reports its latest earnings next week. Some aren't thrilled that Pinnacle is majority-owned by the private-equity firm Blackstone, as that leaves other shareholders with little sway.
Among holdings in which CalPERS increased its stake were Abraxas Petroleum and Infinera . With a market cap not far from $200 million, Abraxas is a small company. It's a penny stock, too, with a stock price well below $5 per share. Abraxas's revenue has been growing, but it has also reported a string of years with negative free cash flow, and it carries significant debt (though less than some colleagues). Its operations are geographically diversified (present in both the Bakken and Eagle Ford regions, for example), and it's shifting its focus from gas to oil and liquids. Abraxas just reported earnings, with revenue up 33%, and adjusted earnings per share flat.
Optical-networking specialist Infinera's stock has surged about 90% over the past year, with investors having great expectations for its DTN-X platform, and its disruptive technology. It recently posted solid second-quarter results, with revenue up 48%, and a narrower-than-expected loss. Management pointed to rising gross margins and growing acceptance of the DTN-X platform.
CalPERS reduced its stake in lots of companies, including QR Energy, LP , which is, like Northern Tier, another Master Limited Partnership and massive yielder, with an 11.4% payout. It's focused on upstream activities, though, rather than Northern Tier's downstream focus, and is liquids-heavy in its operations, with long-term hedging in place. The company just reported quarterly revenue up strongly over year-ago levels, but net income down.
Finally, CalPERS' biggest closed positions included News Corp. and H.J. Heinz. Other closed positions of interest include MEMC Electronic Materials, and EnergySolutions.
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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