Snagging Ideas From the Greats

 | Feb 14, 2014 | 4:00 PM EST  | Comments
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Before we move off into the first weekend of baseball spring training, I want to take some time to review some of the other 13F SEC filings that have come in so far this week. These filings give us access to the buying and selling activities of the best minds in the business, providing more information than you can get from a staged interview or comments. They're real-money decisions -- not just opinions and conjecture.

For myself, 13Fs function as my personal underpaid -- as in free -- research department, and they have helped me uncover some fantastic ideas over the years. The buy ideas are useful, though it's as important to know that a smart, successful investor is selling a stock that you like. It can be a wake-up call and force you to challenge your own thoughts and recheck your research and conclusions.

Everybody and their brother is going to dissect Seth Klarman's filings over the weekend, so I won't go too in-depth here. But the noted value investor did made three interesting buys. One was Alon (ALDW), of which his funds bought 329,000 shares. This master limited partnership owns and operates an oil refinery, and has a very high yield right now. Klarman must also like the small refiners right now, as well, as he also more than doubled his stake in PBF Energy (PBF). Klarman additionally bought shares of title insurer Fidelity National (FNF) during the final three months of the year.

David Nierenberg of D3 Partners is not a household name, but he probably should be for those of us who are long-term value investors. I have stolen some wildly profitable ideas from Nierenberg over the years. Among these have been Brooks Automation (BRKS), whose shares doubled after Nierenberg first bought it, and C&J Energy (CJES), which has also doubled.

In the final quarter of the year, Nierenberg was loading the boat with both A-class and B-class shares of Tecumseh (TECUA) -- his only buy in that period. The company makes compressors used in refrigerators and air conditioners, and it is very cheap at less than 70% of book value. The fund also has big stakes in Rosetta Stone (RST) and Electro Scientific (ESIO), and Nierenberg didn't add to them in the quarter, but he didn't sell any, either.

Meanwhile, Monish Pabrai just keeps buying Horsehead (ZINC). The stock has risen 47% over the past year, but that didn't stop Pabrai from increasing his stake by 24% to more than 6.3 million shares. Horsehead produces and sells zinc and nickel-based products, and the company has seen its profit explode this year. Pabrai runs a very concentrated portfolio, so it's also notable that he sold almost 25% of his stake in Goldman Sachs (GS) during the quarter.

Howard Marks of Oaktree Capital is primarily a debt investor, so it is always interesting to see what equities he has accumulated. Marks' biggest buy was the back stop of the EXCO Resources (XCO) rights offering, which led to a 23% increase in his stake in the natural gas producer. Wilbur Ross and Prem Watsa joined him in that effort and also increased their respective holdings EXCO. While this is not a traditional deep-value stock, it is one of my favorite special-situation picks, and it appears to have tremendous long-term upside. The stock trades for about 25% of the price that was offered in a failed takeover attempt two years ago.

Oaktree also opened a new position in shares of McDermott (MDR) during the quarter. The global engineering-and-construction company has struggled in the past year, and the stock now appears to be very close to bargain levels. The firm also added to its holdings in Starbulk Carriers (SBLK), increasing its position by about 30%.

Finally, the firm also more than doubled its stake in Indian automobile manufacturer Tata Motors (TTM) and Peru-based Buenaventura Mining (BVN). The former name continues to trade at a very low multiple of earnings. As for Buenaventura, this is one of my favorite long-term picks. Shares of the company -- which mines for gold and silver, zinc, lead and copper -- trade at just 84% of book value and 10x earnings. Buenaventura should see a huge rebound in its profit and stock price when the precious-metals markets improve.

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