13F Watch: Buffett Buys Exxon Mobil, Ackman and Berkowitz Target Fannie and Freddie

In the third quarter of 2013, institutional investors added to their equity holdings in the technology sector while reducing exposure to consumer staples and financials. Among the most widely held stocks, portfolio managers as a group added to positions in Amgen (AMGN), Facebook (FB), General Motors (GM), and Bank of America (BAC). They trimmed positions in Pfizer (PFE), AT&T (T), Exxon Mobil (XOM), and Microsoft (MSFT).

There are times when positioning portfolios defensively is well-advised, but too often institutional managers build low tracking error portfolios aimed at mitigating career risk but that are doomed to deliver sub-par performance after fees and expenses. The managers we’ve highlighted below are no index huggers, however. At the end of the September, their top five long positions on average accounted for over half of their portfolios’ value.

Below we recap some of the portfolio changes made by these prominent investors during the most recent quarter:

• Bill Ackman (Pershing Square Capital): Ackman sold out of his losing position in JC Penney (JCP) and trimmed his short position in Herbalife (HLF). Matson (MATX) was also jettisoned from the portfolio, while positions in General Growth Properties (GGP), Procter & Gamble (PG), and Canadian Pacific Railway (CP) were reduced. He added to his recently established position in Air Products & Chemicals (APD) and, since the end of the quarter, disclosed just under 10% stakes in Fannie Mae (FNMA) and Freddie Mac (FMCC). At the end of the quarter, Ackman’s top holdings remained Canadian Pacific Railway (CP), Air Products & Chemicals (APD), Beam (BEAM), Burger King Worldwide (BKW), and General Growth Properties (GGP).
• Bruce Berkowitz (Fairholme Funds): Berkowitz was quiet during the quarter, adding to an existing position in Sears Holdings (SHLD), while trimming stakes in a number of companies, including St Joe (JOE), Citigroup (C), Wells Fargo (WFC), Hartford Financial Services Group (HIG), and Berkshire Hathaway (BRK/B). Berkowitz recently garnered headlines when he announced a proposal to buy the mortgage insurance businesses of Fannie Mae (FNMA) and Freddie Mac (FMCC). At the end of the third quarter, American International Group (AIG), Bank of America (BAC), Sears Holdings (SHLD), Leucadia National (LUK), and St Joe (JOE) remained Fairholme’s top holdings.
• Warren Buffett (Berkshire Hathaway): Berkshire disclosed a stake in Exxon Mobil (XOM), Buffett’s biggest new position since its purchase of International Business Machines (IBM) in 2011. Berkshire also added to existing stakes in Suncor Energy (SU), VeriSign (VRSN), US Bancorp (USB), Bank of New York Mellon (BK), and DaVita HealthCare Partners (DVA), and reduced positions in ConocoPhillips (COP), DIRECTV (DTV), GlaxoSmithKline (GSK), and Sanofi (SNY). Top holdings at the end of the quarter remained Wells Fargo (WFC), Coca-Cola (KO), International Business Machines (IBM), American Express (AXP), and Procter & Gamble (PG).
• David Einhorn (Greenlight Capital): Einhorn’s added new positions in Intrexon (XON), Tempur Sealy International (TPX), and NVR (NVR), and added to stakes in WPX Energy (WPX), Oil States International (OIS), Spirit Aerosystems Holdings (SPR). Positions in Oaktree Capital Group (OAK), State Bank Financial (STBZ), and Capital Bank Financial (CBF) were eliminated, while notable reductions were made in Aetna (AET), Aspen Insurance Holdings (AHL), Legg Mason (LM), NCR (NCR), and Cigna (CI). 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): GMO’s new positions included Omnicom Group (OMC), Spreadtrum Communications (SPRD), Illinois Tool Works (ITW), Adobe Systems (ADBE), and Leap Wireless International (LEAP). Notable sells included Yandex (YNDX), Sherwin-Williams (SHW), Time Warner Cable (TWC), and Credicorp (BAP). At the end of the quarter, GMO’s top holdings included Microsoft (MSFT), Johnson & Johnson (JNJ), Google (GOOG), Oracle (ORCL), and Coca-Cola (KO).
• Seth Klarman (Baupost Group): Klarman added a new position in PBF Energy (PBF), and added to stakes in Micron Technology (MU), Theravance (THRX), Idenix Pharmaceuticals (IDIX), and ChipMOS TECHNOLOGIES (IMOS). Positions were eliminated in American International Group (AIG), Yamana Gold (YRI), Kinross Gold (KGC), and Pretium Resources (PVG), and reduced in BP (BP), Central Pacific Financial (CPF), Alliance One International (AOI), and Ituran Location and Control (ITRN). Top holdings at the end of the quarter included Micron Technology (MU), Theravance (THRX), Via Sat (VSAT), BP (BP), and Idenix Pharmaceuticals (IDIX).
• Dan Loeb (Third Point): Loeb’s largest new positions established during the quarter included FedEx (FDX), Google (GOOG), EQT (EQT), Intrexon (XON), and Activision Blizzard (ATVI). Loeb also made news when he made public his increased position in Sothebys (BID). Notable sales from the portfolio included Tiffany & Co. (TIF), WESCO International (WCC), and Williams Companies (WMB). At the end of the quarter, top holdings included Yahoo! (YHOO), American International Group (AIG), Sothebys (BID), FedEx (FDX), and Liberty Global (LBTYA).
• Howard Marks (Oaktree Capital): Marks new positions included Masonite International (DOOR), Star Bulk Carriers (SBLK), NetApp (NTAP), EMC (EMC), and Altria Group (MO). Notable sells included Caesars Entertainment (CZR), Safeway (SWY), Constellium (CSTM), Grupo Financiero Santander Mexico (BSMX), and Genco Shipping & Trading (GNK). Top holdings at the end of the quarter included EXCO Resources (XCO), First BanCorp/Puerto Rico (FBP), Masonite International (DOOR), Delphi Automotive (DLPH), and Dynegy (DYN).
• Nelson Peltz (Trian Partners): Peltz added to his position in Legg Mason (LM) during the quarter, sold his stakes in State Street (STT) and Sothebys (BID), and reduced his position in Ingersoll-Rand (IR). Top holdings at the end of September included Mondelez (MDLZ), PepsiCO (PEP), Ingersoll-Rand (IR), Wendy’s (WEN), and Family Dollar Stores (FDO).
• Barry Rosenstein (Jana Partners): Rosenstein’s largest new positions during the third quarter included Mallinckrodt (MNK), Outerwall (OUTR), News Corp. (NWSA), Huntsman (HUN), and Walgreen (WAG). Notable sells from the portfolio included Health Management Associates (HMA), Aetna (AET), Boeing (BA), Eastman Chemical (EMN), and Expedia (EXPE). At the end of September, top holdings included Agrium (AGU), Ashland (ASH), Oil States International (OIS), URS (URS), and Equinix (EQIX).
• David Tepper (Appaloosa Management): Tepper’s new positions included Freeport-McMoRan Copper & Gold (FCX), Ingredion (INGR), Community Health Systems (CYH), Tenet Healthcare (THC), and JC Penney (JCP). Notable sells from the portfolio included Comcast (CMCSA), Microsoft (MSFT), Weatherford International (WFT), Check Point Software Technologies (CHKP), and NetApp (NTAP). At the end of the third quarter, top holdings included Citigroup (C), Goodyear Tire & Rubber (GT), United Continental Holdings (UAL), Delta Air lines (DAL), and HCA Holdings (HCA).

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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