Practical analysis for investment professionals
16 May 2013

13F Watch: Funds Add Health Care and Trim Technology as Activists Take Center Stage

In the first quarter of 2013, institutional investors added to their equity holdings in the healthcare sector while reducing their exposure to the technology stocks. Among the most widely held stocks, portfolio managers as a group added to positions in Citigroup (C), Johnson & Johnson (JNJ), Microsoft (MSFT), and BlackRock (BLK), and trimmed positions in Apple (AAPL), Oracle (ORCL), Pfizer (PFE), and Coca-Cola (KO).

In his book, One Up on Wall Street, renowned fund manager Peter Lynch said of the perfect stock, “The institutions don’t own it, and the analysts don’t follow it.” With institutional ownership of equities nearly doubling in the past 30 years, it has become harder to find such undiscovered gems. Despite Lynch’s advice, the fanfare associated with the recent Sohn and SALT hedge fund conferences, and Buffett-palooza, is clear evidence that the investing public is intently focused on the portfolio moves of celebrated investors. And while many fund managers bemoan the attention their quarterly Form 13F portfolio disclosures receive, those managers with an activist bent often seem to relish the limelight as a means of pressuring firms they’ve targeted. The collective performance record of hedge funds in recent years suggests, however, that investors should not blindly follow their lead. And, as hedge funds turn their portfolios over an estimated 35% per quarter, mimicking their trades is, arguably, a futile exercise. We nevertheless recap below some of the more notable portfolio changes made by several prominent investors during the most recent quarter.

  • Bill Ackman (Pershing Square Capital): Ackman, who has suffered some well-publicized stumbles of late, was quiet on the trading front in the first quarter of 2013. Besides decreasing a position in Alexander & Baldwin Holdings (MATX), he added to stakes in Burger King Worldwide (BKW) and Mondelez International (MDLZ). At the end of the quarter, Ackman’s top holdings included Canadian Pacific Railway (CP), Procter & Gamble (PG), General Growth Properties (GGP), Beam (BEAM), and Burger King Worldwide (BKW).
  • Kyle Bass (Hayman Advisors): Bass remains bearish as ever on Japan, and his lone new equity position was ZIOPHARM Oncology (ZIOP). He eliminated stakes in Vivus (VVUS), Newcastle Investment (NCT), Hyatt Hotels (H), Dynegy (DYN), Sealy (ZZ), and Realogy Holdings (RLGY). Bass’ top holdings at the end of the quarter included Tempur-Pedic International (TPX), Nationstar Mortgage Holdings (NSM), Huntsman (HUN), Dex Media (DXM), and SuperMedia (SPMD).
  • Bruce Berkowitz (Fairholme Funds): Berkowitz established new positions in Chesapeake Energy (CHK), Canadian Natural Resources (CNQ), and Genworth Financial (GNW), and eliminated positions in CIT Group (CIT) and Jeffries Group (JEF). At the end of the quarter, American International Group (AIG), Bank of America (BAC), Sears Holdings (SHLD), St Joe (JOE), and Leucadia National (LUK) remained Fairholme’s top holdings.
  • Warren Buffett (Berkshire Hathaway): Buffett initiated positions in Liberty Media (LMCA), and Chicago Bridge & Iron (CBI), and sold out of positions in General Dynamics (GD) and Archer Daniels Midland (ADM). Top holdings at the end of the quarter included Wells Fargo (WFC), Coca-Cola (KO), International Business Machines (IBM), American Express (AXP), and Procter & Gamble (PG).
  • David Einhorn (Greenlight Capital): Einhorn established new positions in Oil States International (OIS), Hess (HES), Spirit AeroSystems Holdings (SPR), IAC/InterActiveCorp (IACI), Capital Bank Financial (CBF), and National Bank Holdings (NBHC). Positions were eliminated in ENSCO (ESV), Xerox (XRX), Yahoo! (YHOO), NVR (NVR), and Google (GOOG). Top holdings at the end of the quarter included Apple (AAPL), General Motors (GM), Marvell Technology Group (MRVL), Cigna (CI), and Aetna (AET).
  • Jeremy Grantham (GMO): Grantham’s largest new positions included Yandex NV (YNDX), Virgin Media (VMED), CTC Media (CTCM), Copano Energy (CPNO), and Aurizon Mines (AZK). Notable sells included Grupo Aeroportuario del Sureste (ASR), Agrium (AGU), Cymer (CYMI), Nexen (NXY), and NetEase (NTES). At the end of most recent quarter, GMO’s top holdings included Johnson & Johnson (JNJ), Google (GOOG), Coca-Cola (KO), Pfizer (PFE), and Microsoft (MSFT).
  • Seth Klarman (Baupost Group): Klarman added new stakes in Elan (ELN) and DIRECTV (DTV), and eliminated positions in News (NWSA), Genworth Financial (GNW), and Allied Nevada Gold (ANV). Top holdings at the end of the quarter included BP PLC (BP), Via Sat (VSAT), American International Group (AIG), Theravance (THRX), and Rovi (ROVI)..
  • Dan Loeb (Third Point): Before his recent disclosure of a 6.5% stake in Sony (SNE), Loeb’s largest new positions established in the first quarter included Virgin Media (VMED), Tiffany (TIF), B/E Aerospace (BEAV), Anadarko Petroleum (APC), and Thermo Fisher Scientific (TMO). Notable sales from the portfolio included Tesoro (TSO), Morgan Stanley (MS), Nexen (NXY), Symantec (SYMC), and Herbalife (HLF). At the end of the quarter, top holdings included Yahoo! (YHOO), Virgin Media (VMED), American International Group (AIG), International Paper (IP), and News Corp (NWSA).
  • Howard Marks (Oaktree Capital): Marks initiated new positions in Alliance HealthCare Services (AIQ), MGIC Investment (MTG), Capital Bank Financial (CBF), and Preformed Line Products (PLPC), while eliminating Oaktree’s stake in Eagle Bulk Shipping (EGLE). Top holdings at the end of the quarter included First BanCorp/Puerto Rico (FBP), EXCO Resources (XCO), Charter Communications (CHTR), Delphi Automotive (DLPH), and Dynegy (DYN).
  • Barry Rosenstein (Jana Partners): Rosenstein’s largest new positions included Ashland (ASH), BMC Software (BMC), Groupon (GRPN), Boeing (BA), and DIRECTV (DTV). Positions were eliminated in Coventry Health Care (CVH), American International Group (AIG), ADT (ADT), TripAdvisor (TRIP), and Netflix (NFLX). At the end of the quarter, top holdings included Agrium (AGU), Ashland (ASH), QEP Resources (QEP), Verisign (VRSN), and Copart (CPRT).
  • David Tepper (Appaloosa Management): Tepper’s largest new positions included Comcast (CMCSA), Prudential Financial (PRU), Hess (HES), Check Point Software Technologies (CHKP), and KBR (KBR). Positions were eliminated in Oracle (ORCL), Noble (NE), ENSCO (ESV), Freeport-McMoRan Copper & Gold (FCX), and BorgWarner (BWA). At the end of the quarter, top holdings included Citigroup (C), United Continental Holdings (UAL), Apple (AAPL), QUALCOMM (QCOM), and Goodyear Tire & Rubber (GT).

Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.

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About the Author(s)
David Larrabee, CFA

David Larrabee, CFA, was director of member and corporate products at CFA Institute and served as the subject matter expert in portfolio management and equity investments. Previously, he spent two decades in the asset management industry as a portfolio manager and analyst. He holds a BA in economics from Colgate University and an MBA in finance from Fordham University. Topical Expertise: Equity Investments · Portfolio Management

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