Following Some Less-Known Leaders

 | Feb 10, 2014 | 2:30 PM EST  | Comments
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It is one of my favorite weeks of the year. This is the week when I get all the reports from world-class research departments, and best of all, it is completely free. I am talking about the Securities and Exchange Commission filings known as 13fs that are due at the end of the week. These filings will disclose the buying and selling activities of some of the world's best money managers and hedge-fund managers. By simply comparing the latest 13fs with the last filings, I will know what the best investors on the planet were buying and selling in the last quarter of the year.

Everyone and their brother are going to cover the big filings. By next weekend, you won't be able to turn around without someone talking about what Warren Buffett, Carl Icahn and Bill Ackman bought and sold in the quarter. The filings of David Einhorn and Daniel Loeb will be breaking news and discussed everywhere by everybody. These are very smart guys, so I will read the filings as well and ponder their decisions, but there is very little value added by talking about them here. I prefer to point you in the direction of some very smart, successful folks who are not as famous but who are nonetheless worth following in the constant ongoing search for safe and cheap stocks.

Kahn Brothers is always one of the first firms to file, and this quarter is no different, as the firm, which was founded by the 108-year-old value investor Irving Kahn, filed last week. The firm was mostly a seller of stocks in the quarter. The only increase was in its holdings of Merck (MRK) and BP (BP). There were no new buys in the last three months of the year.

There was, however, a lot of selling as the firm trimmed many positions. The total equity value of Kahn Brothers' portfolio declined by more than $100 million during the quarter. As most of the holdings went up during the time period, it would appear that the firm is raising cash across the portfolio. Notable sales include BlackBerry (BBRY), Astec Industries (ASTE), The New York Times Co. (NYT), Pfizer (PFE) Citigroup (C) and New York Community Bancorp (NYCB) -- the firm reduced each holding by 20% or more. The real takeaway from this report is that Kahn Brothers is starting to sell stuff it believes has gone up too far and is having a hard time finding new stocks that fit its value criteria.

Donald Smith & Co. has also filed well in advance of the deadline, and while that firm found more things to buy than the Kahn Brothers, it still appears to have sold more stock than it bought in the quarter. The value firm added to its stake in gold miners, buying more of AuRico Gold (AUQ) and opening a new stake in New Gold (NGD). The firm also increased its stake in the silver miners this quarter, buying more than 1.4 million shares of Pan American Silver (PAAS). The firm already owns over 7 million shares of Coeur Mining (CDE).

The firm also bought shares of Blue Capital Reinsurance (BCRH) a newly public Bermuda reinsurance company that operates as a subsidiary of Montpelier Re Holdings (MRH). This is an interesting company that may turn out to be a great vehicle for income-oriented investors. The new company attempts to maximize returns, particularly dividends, for shareholders by underwriting short-tail reinsurance contracts and investing in insurance securities. At the current price, the shares are priced at just 86% of book value, and Blue Capital intends to pay out 90% of distributable income as cash dividends to common shareholders.

Donald Smith & Co. has been in airline stocks for some time now but appears to be taking profits, as it sold out of U.S. Airways (LCC) and reduced its holdings in Southwest Airlines (LUV) by more than half. The firm also cut its holdings in aircraft leasing firms, reducing its holdings in AerCap Holdings (AER) by 6% and Aircastle (AYR) by 23%. Smith also sold almost all of its stake in the yarn manufacturer Unifi (UFI) in the last three months of the year.

13F filings are an incredibly valuable tool for the individual investor. Tracking the buying and selling of very smart investors can help us uncover new ideas and spot developing trends in the market. It is worth the several hours of your time every three months to go through the reports of the best value, distressed and activist investors in the world in search of ideas and insight.

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