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13F Filings: The Buys and Sells of Superstar Investors


August means 13F filing season, which allows us to peek into the minds of the world's greatest investors. Consumer staples and technology are in, while Citigroup is out.

If it's August, it must be time once again for institutional money managers with assets of at least $100 million to update the Securities & Exchange Commission (SEC) on their stock holdings via Schedule 13F.

Back in May – the last time shareholders were required to update their holdings – I discussed David Einhorn's new position in Computer Sciences (CSC). When I wrote the article, the stock was trading for $26.67 per share and now trades at $33.02, a 23.8% gain in three months!

During the most recent May-to-August period, 10 out of the 16 stocks highlighted (62.5%) made a profit (a sold stock is considered profitable if the stock went down in price). Making a profit is different from outperforming a stock index, however. Of the 12 stocks bought by the gurus, only four (33%) outperformed the S&P 500's (^GSPC) comparable gain of 8.1%. Of the four stocks sold, three (75%) underperformed the S&P 500, so the gurus were much better bears than bulls. Besides Computer Sciences, other nice winners were all Julian Robertson picks: Apple (AAPL) (17.1%), Sherwin-Williams (SHW) (12.8%), and HCA Holdings (HCA) (11.7%).

Ironically, of the four stocks highlighted from Seth Klarman's portfolio, both stocks that he had purchased went down in value while the two stocks he had sold went up, which included the third-best performer of all in BP (BP) (13.9%). Pathetic, no?

To be perfectly frank, Seth Klarman really stunk out the joint this quarter, underperforming the S&P 500's 8.1% gain by a wide margin. This is very unusual because Klarman is considered one of the best value investors of all time. Nevertheless, Klarman's recent fascination with biotech stocks and gold mining stocks – two industries that his classic investment book Margin of Safety would classify as speculations rather than investments -- have really done him in. In the first quarter, biotechs Targacept (TRGT) and Idenix Pharmaceuticals (IDIX) were huge losers for Klarman and he followed those disasters up by buying more Idenix only to see it perform even worse in the second quarter than it did in the first!

Lesson to be learned: Don't follow Klarman's lead on biotech and gold, but follow him on virtually everything else!

Two other of the superstar investors (Robertson and Einhorn) also had at least one really bad trade. To summarize the losers:
  • Seth Klarman's Idenix Pharmaceuticals (down 35.6%) and NovaGold Resources (NG) (down 21.1%)
  • Julian Robertson's Starbucks (SBUX) (down 12.8%)
  • David Einhorn's General Motors (GM) (down 1.2%)
Ironically, the one superstar investor who didn't pick a single losing stock -- Chuck Akre -- was also the only one of the four gurus that didn't have a single stock outperform the S&P 500. All the other gurus outperformed on at least one of the four stock picks (if you include stocks sold that underperformed the S&P 500). So, I can't praise Akre despite his lack of losers. The only two gurus worthy of praise are David Einhorn and Julian Robertson because they each outperformed the S&P 500 on three out of their four stock picks. Just goes to show you that mindlessly piggybacking on anybody else's picks without doing your own research is no sure-fire way to beat the market.

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