The deadline for 13F filings has come and gone and to my wife's great relief the stacks and scraps of paper floating around my office will soon be devoured by the shredder.
I scan the 13F filings of a lot of money managers online but the ones I am really interested in reviewing I print out and compare to the prior filing by hand. Shockingly, there are occasional errors in online coverage so I do it the old fashioned way. HP, Inc. (HPQ) loves me for it, as I burn through quite a bit of ink, but my order-loving wife is not fond of the process.
Several of my favorites to steal ideas from filed early yesterday and I have had a chance to review their filings for new ideas.
Michael Price has made me an enormous amount of money over the years and I look forward to his 13F filing each quarter. Apparently, he thinks there will be some decent economic growth over the next few years, or that some of the commodity and resource stocks are just too cheap.
Price was a buyer of Exxon Mobil (XOM), Westlake Chemical (WLK), United States Steel (X), Universal Stainless & Alloy Products (USAP), Resolute Forest Products (RFP), Baker Hughes (BHI) and Devon Energy (DVN) in the third quarter. These are beaten and battered names and may have some short-term downside ahead, but the long-term returns from these resource-related stocks could be enormous.
In addition, Price moved into the energy MLP space during the quarter, purchasing a new stake in Plains All American Pipeline (PAA). PAA owns extensive energy-related assets, including 17,800 miles of active crude oil and natural gas liquids pipelines and 29 million barrels of active and above-ground tank capacity.
There is some feeling that PAA will have to cut its dividend, as many other MLPs have done in recent months. PAA's cash flow is declining but on the last conference call management didn't seem all that concerned. CEO Greg Armstrong said the he was constructive on the intermediate long-term outlook for oil. Price also took a stake in Plains GP Holdings (PAGP), the general partner of PAA.
During the quarter, Price's fund also bought shares of Boardwalk Pipeline Partners (BWP), which owns 14,190 miles of pipelines, and American Midstream Partners (AMID), an MLP that owns 12 gathering systems, five processing facilities, three fractionation facilities, three interstate pipelines, five intrastate pipelines, and four marine terminal site serving the oil and gas industry.
Looking at his buys in the third quarter it is pretty cleat the Michael Price is starting to see some value in the oil patch. Price is patient, with the long timeframe of a deep value investor, and if oil prices rise over the next few years he should reap significant profits from these stocks.
Another filing I read each quarter is that of David Nierenberg of D3 Funds. Nierenberg runs a very concentrated portfolio. He likes to buy large stakes in smaller companies and prefers the term "friendly persuasion" to "activist" -- but the result is the same. The fund identifies what it believes are deeply undervalued names and works with management to increase the value of the company.
Nierenberg jumped deeper into the oil patch in the third quarter. He increased his stake in C&J Energy Services (CJES), which provides completion and production services for the oil and gas industry in North America. Needless to say, business is horrible and C&J took a non-cash write-down last quarter of goodwill and intangible assets totaling $367 million.
C&J is managing costs, laying off people and idling equipment to deal with the continued slowdown. The company is seeing a significant slowdown in its hydraulic fracking operations and that business is not going to get better until oil prices recover. If C&J survives, the stock could be a home run from this level as the stock traded at more than $30 in the spring of 2014. Based in my years of tracking Nierenberg's activity, I believe his involvement increases the chance that the company survives until it can thrive again when oil prices finally recover.
Meanwhile, Nierenberg more than tripled his stake in Geospace Technologies (GEOS) in the quarter as the stock price declined. Houston-based Geospace designs and manufactures instruments and equipment used in the acquisition and processing of seismic data for the oil and gas industry. With exploration slowing down dramatically business is less than fantastic and the stock is down 40% in 2015.
Nierenberg also added to his stake in Flotek Industries (FTK), a company that provides chemicals and has a consumer and industrial chemicals technologies unit that manufactures products to the flavor and fragrance industry. He rounded out his third quarter buying by increasing his stake in Malibu Boats (MBUU), a manufacturer of go-fast boats.
The news will be all about the big funds and their activities in the quarter but the big values are usually found in the portfolios of the smaller, less well known activist and value investors.