More Must-Read 13Fs

 | Feb 15, 2013 | 4:00 PM EST
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The Securities and Exchange Commission's 13F filing deadline has come and gone, and this holiday weekend is a good time to sit back and review the flood of buying and selling reports coming from the best value and activist money managers. It's a lot like having the world's best research department at your fingertips, and you get to pick and choose which suggestions to act on. I have made tons of money over the years picking up safe and cheap stock ideas from other value managers. Thanks to federal regulations, it's like being forced to share your best candy with the other kids, and I shamelessly steal from managers I most respect.

There is massive media coverage on the big, well-known managers, so I tend to focus my Real Money 13F coverage on those a little bit off the radar. One of my favorites is the eponymously named Donald Smith & Co. The firm has been around since 1975 and has compiled a strong record managing money using the same strategy that I use, by focusing on tangible book value. When I contacted Donald Smith late last year for an interview, he turned me down -- it actually makes me like the guy even more as it's the reclusive, closed-mouth managers who often have the best ideas.

Based on Smith & Co.'s latest filing, the firm has been busy. It sold out of several positions, including one of our disasters last year, SuperValu (SVU). It also exited Cooper Tire & Rubber (CTB) and Louisiana-Pacific (LPX). It also sharply reduced positions in Dillard's (DDS), Republic Airways (RJET) and Royal Caribbean Cruises (RCL). These stocks made decent moves in the past year, so one would assume that Smith & Co. no longer finds them safe and cheap enough to own.

Smith &Co.'s funds were surprisingly active on the buy side of the market. They added to value stocks favorites like Tecumseh Products (TECUA), Ingram Micro (IM) and American National Insurance (ANAT). The firm also continued to increase its position in the non-legacy discount airlines, buying more of both Southwest (LUV) and JetBlue (JBLU). The firm also has an appetite for insurance stocks; in addition to joining the AIG (AIG) parade, they purchased shares of Unum (UNM), Horace Mann Educators (HMN) and Platinum Underwriters (PTP). Smith's firm continues to stick to its core strategy and the filing is worth the time to read for long-term investors.

Another must-read 13F filing is from Michael Price, who may no longer the rock star he was when he ran the Mutual Series funds but is still racking up solid returns at the helm of MFP Investors. I have been stealing ideas from Price since the late 1980s, and I probably owe him dinner at this point.

The firm shares my affection for small banks and it continues to increase its presence in Trade of the Decade stocks. MFP was a buyer of Cape Bancorp (CBNJ), a small New Jersey bank with 16 branches serving Cape May and Atlantic County. In the same region, it bought Delaware-based The Bancorp (TBBK), which serves Philadelphia, New Jersey as well as its home state. The fund has 35% of its assets in financial stocks, including many little banks too small to mention but worth investigating for long-term investors in bank stocks. MFP's 13F filing is a must-read for those looking for new ideas.

One observation that really stood out as I went through the filings this quarter was how crowded a trade AIG has become. Everyone was buying the stock hand over fist in the final quarter, from Seth Klarman to David Tepper. Eighty-four percent of AIG is now held by institutional investors and the list contains most of the brightest minds in the business. This both intrigues me and scares me. The stock appears to be a bargain with huge upside but in the back of my mind, I keep hearing Sir John Templeton's warning that it is hard to outperform doing what everyone else does. The stock has doubled from the 2011 lows, but this is one to pass on in spite of all the smart money buying the shares.

I'm heading into the three-day weekend with a ton of 13Fs to dig through. If I turn up anything else that's interesting, I'll report back next week.

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