Potential Investment Targets Of Warren Buffett - Part III

Warren Buffett sits on big cash that is growing each month. I've started an article serial that discovers potential white elephants which could be potential takeover targets for the big guru investor.

The ideas came from Bloomberg. In my view, they are a little bit abstract and far away from that you might think because they were discovered by strict criteria.

Today you can find additional 5 stocks which could be interesting for the institutional investor from Omaha.

Here you can find the first two articles with the criteria:

5 Stocks That Warren Buffett Would Love: Part II
Warren Buffett's Targets Part I

5 stocks that Warren Buffett should like are..

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5 Stocks That Warren Buffett Would Love: Part II

Yesterday, I wrote about stocks that Warren Buffett would love. 

I introduced five picks that are often mentioned when analysts talk about potential takeover targets by the guru investor from Omaha.

Today I will continue this stock idea spinning by showing you additional companies that fulfill the following criteria:

- Market Capitalization from $15 Billion to $40 Billion

- Capital Expenditures / Net Fixed Assets under 10%

- 5-Year Average Growth in ROIC in Highest 50%

- P/E Ratio Below Average Company Value in Home Market

- Return on Common Equity over 10%

- Excludes Banks, Brokerages, Asset Managers, Technology, Biotechnology Companies

There are a few stocks available on the market that fulfill these restrictions. Some of those stocks are still in his latest portfolio but there are also many fresh ideas as you might have seen in the first part of this article serial.

Additional 5 stocks that Warren Buffett would love are...

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Warren Buffett's Targets Part I: Potential White Elephants Of The Guru Investor

Warren Buffett is one of the most trusted and popular investors on the market. He made from a dozen dollars over USD 58 billion. On this blog, I also cover the activities of the guru investor and publish his trades and thoughts.

There are several speculations on the market what Warren Buffett buys next. He has around USD 15 billion in cash, a number that is growing monthly. Some of Warren Buffett's criteria are:

- Market Capitalization from $15 Billion to $40 Billion

- Capital Expenditures / Net Fixed Assets > 10%

- 5-Year Average Growth in ROIC in Highest 50%

- P/E Ratio < Average Company Value in Home Market

- Return on Common Equity > 10%

- Excludes Banks, Brokerages, Asset Managers, Technology, Biotechnology Companies

By screening the market with the above mentioned criteria, there are popping out a few interesting stocks. Some are often discussed like General Mills or Hershey, W.W. Grainger or FedEx.

Big takeovers make sense for Warren Buffett, also when they are higher valuated. More important are the stable cash flows. The strategy is to buy stocks that have big brands and produce products. They buy commodities and create wonderful things for people all over the world.

5 picks that Warren Buffett would like to consider....

General Mills (NYSE:GIS) has a market capitalization of $30.78 billion. The company employs 41,000 people, generates revenue of $17.774 billion and has a net income of $1.793 billion. General Mills’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $3.443 billion. The EBITDA margin is 19.37 percent (the operating margin is 16.04 percent and the net profit margin 10.09 percent).

Financial Analysis: The total debt represents 35.17 percent of General Mills’s assets and the total debt in relation to the equity amounts to 119.44 percent. Due to the financial situation, a return on equity of 28.34 percent was realized by General Mills. Twelve trailing months earnings per share reached a value of $2.69. Last fiscal year, General Mills paid $0.99 in the form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 18.31, the P/S ratio is 1.73 and the P/B ratio is finally 4.73. The dividend yield amounts to 3.08 percent and the beta ratio has a value of 0.20.

Long-Term Stock Price Chart Of General Mills (GIS)

Long-Term Dividend Payment History of General Mills (GIS)

Long-Term Dividend Yield History of General Mills (GIS)

Hershey (NYSE:HSY) has a market capitalization of $21.45 billion. The company employs 12,100 people, generates revenue of $6.644 billion and has a net income of $660.93 million. Hershey’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $1.399 billion. The EBITDA margin is 21.07 percent (the operating margin is 16.72 percent and the net profit margin 9.95 percent).

Financial Analysis: The total debt represents 40.10 percent of Hershey’s assets and the total debt in relation to the equity amounts to 183.93 percent. Due to the financial situation, a return on equity of 69.79 percent was realized by Hershey. Twelve trailing months earnings per share reached a value of $3.45. Last fiscal year, Hershey paid $1.56 in the form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 27.80, the P/S ratio is 3.21 and the P/B ratio is finally 20.71. The dividend yield amounts to 2.02 percent and the beta ratio has a value of 0.21.

Long-Term Stock Price Chart Of Hershey (HSY)

Long-Term Dividend Payment History of Hershey (HSY)

Long-Term Dividend Yield History of Hershey (HSY)

W.W. Grainger (NYSE:GWW) has a market capitalization of $17.65 billion. The company employs 21,100 people, generates revenue of $8.950 billion and has a net income of $698.85 million. W.W. Grainger’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $1.357 billion. The EBITDA margin is 15.16 percent (the operating margin is 12.64 percent and the net profit margin 7.81 percent).

Financial Analysis: The total debt represents 11.26 percent of W.W. Grainger’s assets and the total debt in relation to the equity amounts to 18.67 percent. Due to the financial situation, a return on equity of 23.97 percent was realized by W.W. Grainger. Twelve trailing months earnings per share reached a value of $11.25. Last fiscal year, W.W. Grainger paid $3.06 in the form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 22.61, the P/S ratio is 1.97 and the P/B ratio is finally 5.84. The dividend yield amounts to 1.46 percent and the beta ratio has a value of 0.92.

Long-Term Stock Price Chart Of W.W. Grainger (GWW)

Long-Term Dividend Payment History of W.W. Grainger (GWW)

Long-Term Dividend Yield History of W.W. Grainger (GWW)

CBS Corporation (NYSE:CBS) has a market capitalization of $37.00 billion. The company employs 20,930 people, generates revenue of $14.089 billion and has a net income of $1.669 billion. CBS Corporation’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $3.594 billion. The EBITDA margin is 25.51 percent (the operating margin is 20.95 percent and the net profit margin 11.85 percent).

Financial Analysis: The total debt represents 22.38 percent of CBS Corporation’s assets and the total debt in relation to the equity amounts to 57.98 percent. Due to the financial situation, a return on equity of 16.24 percent was realized by CBS Corporation. Twelve trailing months earnings per share reached a value of $2.94. Last fiscal year, CBS Corporation paid $0.44 in the form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 20.96, the P/S ratio is 2.63 and the P/B ratio is finally 3.80. The dividend yield amounts to 0.78 percent and the beta ratio has a value of 2.27.

Long-Term Stock Price Chart Of CBS Corporation (CBS)

Long-Term Dividend Payment History of CBS Corporation (CBS)

Long-Term Dividend Yield History of CBS Corporation (CBS)

FedEx (NYSE:FDX) has a market capitalization of $44.34 billion. The company employs 112,000 people, generates revenue of $44.287 billion and has a net income of $1.561 billion. FedEx’s earnings before interest, taxes, depreciation and amortization (EBITDA) amounts to $5.538 billion. The EBITDA margin is 12.50 percent (the operating margin is 5.76 percent and the net profit margin 3.52 percent).

Financial Analysis: The total debt represents 8.91 percent of FedEx’s assets and the total debt in relation to the equity amounts to 17.19 percent. Due to the financial situation, a return on equity of 9.72 percent was realized by FedEx. Twelve trailing months earnings per share reached a value of $5.19. Last fiscal year, FedEx paid $0.56 in the form of dividends to shareholders.

Market Valuation: Here are the price ratios of the company: The P/E ratio is 27.37, the P/S ratio is 1.00 and the P/B ratio is finally 2.60. The dividend yield amounts to 0.42 percent and the beta ratio has a value of 1.50.

Long-Term Stock Price Chart Of FedEx (FDX)

Long-Term Dividend Payment History of FedEx (FDX)

Long-Term Dividend Yield History of FedEx (FDX)

If you would like to receive more thoughts about Warren Buffett, you should subscribe to my free e-mail list. Alternatively, you can follow me on Facebook or Twitter.

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*I am long GIS. I receive no compensation to write about these specific stocks, sector or theme. I don't plan to increase or decrease positions or obligations within the next 72 hours.

For the other stocks: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I receive no compensation to write about any specific stock, sector or theme.

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Did Social Media Predict Carl Icahn’s Biggest Trades?

The following article was written by our guest author Insider Monkey. There are a select few money managers whose words can move entire markets, but up to this point, only one has mastered the medium of Twitter [TWTR]: Carl Icahn. After creating an account earlier this year, the billionaire has disclosed a few big positions on the micro blogging site, including a purchase of Apple [AAPL] and a sale of Netflix [NFLX] stock.

While the media has had a lot to say about Icahn’s Twitter account, no one has taken the time to examine his trades in terms of social media sentiment. For someone who is likely the world’s most socially active hedge fund manager, surprisingly little analysis has been done in this realm.

With the help of Market Prophit, a company that converts stock-related social media posts into easy-to-read data, we’re able to look at how much chatter Icahn’s biggest trades created. More interestingly, it appears that some of this buzz actually predicted the moves before they happened.

Netflix

Netflix was the recipient of a major cut by Icahn late last month. In a 13D filing and subsequent tweet after the market’s close on October 22nd, the investor reported a 4.5% stake in the streaming video company, about half of what he previously owned. This move came 24 hours after Netflix’s stock price had surged on promising third quarter earnings.

Market Prophit’s CEO, Igor Gonta, revealed to us that on the morning of the 22nd, social media circles were already buzzing about a major seller “doing large block sales” of Netflix, and Icahn’s name was visibly in the rumor mill. By the time the market had closed, Icahn’s official SEC disclosure pressed the stock to drop almost all of its gains from the previous day’s earnings report.

Apple

Any analysis of Carl Icahn and Twitter must include Apple. On the afternoon of August 13th this year, Icahn tweeted that he had a “large position” in the tech giant on the basis of undervaluation, adding that a conversation with Tim Cook was on the table. As Gonta pointed out to us, shares of Apple rallied by nearly 2.5% just 20 minutes after Icahn’s initial tweet, and social media sentiment turned positive approximately two minutes prior to the reveal (see graph here).

The next major event on the Icahn-Apple timeline was on October 1st. Halfway through the morning on this date, Icahn tweeted about the dinner he had with Tim Cook the night before, in which he reiterated his desire for Apple to pursue a $150 billion share buyback plan.

Market Prophit again picked up on bullish chatter before Icahn’s tweet went live at 10:23am. This time, an uptick in positive social chatter led the tweet by a full 40 minutes, and shares of Apple had already risen by almost one full percentage point by half past ten. According to Gonta, social media sentiment turned negative immediately following Icahn’s tweet “because the price had already run up,” indicating that a classic “sell the news” phenomenon had just taken place.

Sitting here in early November, it’s unknown if Icahn will succeed in his quest to convince Apple that a larger buyback will lead to a $1,250 stock price. What we can say with confidence, though, is if the hedge fund manager is active on Twitter again, social media chatter may predict it.

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5 Banks Warren Buffett is Betting on for 2014

By our guest contributor Insider Monkey. As we begin to ponder what sectors will rule the markets in 2014, technology, healthcare and industrials are areas that many pundits point to. If you ask Warren Buffett, though, he’ll provide a decidedly different answer.

On CNBC earlier this week, Buffett gave a ringing endorsement to large-cap banks, revealing that he thinks they’re “in best shape [he] can remember.” While anyone who tracks Berkshire Hathaway’s equity portfolio probably had a hunch Buffett is upbeat on banks—over 40% of his holdings are invested in the financial sector—these new comments indicate we should expect his bullishness to continue into next year.

By focusing on the best picks of the best hedge funds and other elite investors, it’s possible for retail investors to beat the market over the long-term (discover the data behind this phenomenon). Buffett is the cream of the crop and in light of his recent comments, we should take note of how he’s playing the banks.

Wells Fargo [WFC] is unequivocally the billionaire’s biggest banking bet, and his largest equity holding at that. The global giant is lauded for its management practices and simple business model, and its connection to Buffett has helped it land financing and advisory roles in multiple Berkshire acquisitions.

While shares of Wells Fargo are up nearly 25% year-to-date and the bank did beat Wall Street’s third quarter earnings estimates, its home lending business has been hurt by falling mortgage applications. Still, Wells’ long-term growth prospects and scale advantages remain intact, and Buffett has to love its price at a mere 10.6 times forward EPS. Don’t ignore the 2.8% dividend yield either; it's the best payout among the ‘Big Four.’

US Bancorp [USB] is Buffett’s No. 2 bank holding. Due to its attractive valuation, solid dividend yield, and strong growth prospects, many analysts know this regional player as a mini-Wells Fargo. In fact, US Bancorp is the only big bank that generates higher ROE and ROA figures than Buffett’s top pick.

His investment in Goldman Sachs [GS], meanwhile, now represents a major portion of Berkshire’s stock holdings. We discussed the intricacies of Buffett’s new $2 billion investment in Goldman here on MarketWatch last week, but all you need to know is that he doesn’t plan to close it any time soon.

The investment banking and brokerage firm has sentimental value for the billionaire, and it pays just 12% of its earnings out as dividends. Like Wells Fargo and US Bancorp, Goldman’s growth prospects are extremely cheap at current prices, and the multifaceted nature of its business gives Buffett exposure to an area of the financial sector that his other bank stocks don’t.

M&T Bank [MTB] and Bank of New York Mellon [BK] are a couple more Buffett favorites, and both are actually the final two bank stocks held in the top 20 of Berkshire’s equity portfolio. M&T Bank has been a staple in Buffett’s holdings for more than two decades, and it’s the only large U.S. bank that didn’t trim dividend payments during the financial crisis. The bank’s quarterly profit streak of nearly 40 years is legendary, and it’s no secret that Buffett is a fan of M&T CEO Robert Wilmers.

BNY Mellon, lastly, has been in Buffett and Berkshire’s good graces since the third quarter of 2010, and the stake was increased by 30% in their last 13F filing. The trust bank can see its bottom line improve if interest rates increase in the future. Uncertainty surrounding the fate of borrowing costs over the long-term is one reason why BNY Mellon could be considered undervalued.

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Will the Best Leon Cooperman Picks Please Stand Up?

By guest contributor Insider Monkey author Jake Mann. It’s not uncommon to hear hedge fund managers and other prominent investors sounding off on the economy, companies they’re invested in, or even why they hate Apple. So when Leon Cooperman, the billionaire head of Omega Advisors, was on CNBC earlier this week discussing his favorite stock picks, it would appear that this was rational advice all viewers should pay attention to.

Except it’s not.

According to our research at Insider Monkey, the best opportunity for hedge fund piggybackers to outperform the market lies in the small-cap space. Our newsletter that follows this strategy returned 47.6% in its first year (learn how we did it here), and longer-term returns are equally as promising.

In his interview on CNBC, Cooperman mentioned five of his top value investments: Sprint (S), AIG (AIG), Qualcomm (QCOM), KKR Financial (KFN) and SandRidge Energy (SD). All of these picks are fine and dandy in their own right, but only the last two are actually small-caps. In addition to KKR and SandRidge, Leon Cooperman has a few other small-cap stock picks that you should know about.

Atlas Energy

Atlas Energy (ATLS) is Cooperman’s top small-cap pick, and sits at the seventh largest position in his $6.5 billion equity portfolio. Richard Driehaus and Jim Simons are a couple other names that hold this oil and gas E&P, which is up 45% year-to-date. Shares of Atlas have had such a good 2013 because of a few factors: 1) MLPs have seen rising interest from traditional institutional investors, 2) more ETFs are looking at this space, 3) dividend yields have been growing, and 4) the macro environment for domestic natural gas, oil and NGLs is very bullish.

In addition to the impressive appreciation, Atlas Energy pays a 3.5% dividend yield that has quadrupled since 2011, and the valuation isn’t overblown at an enterprise value 2.3 times its revenue.

Chimera Investment

Chimera Investment (CIM), on the other hand, is a small-cap REIT that has been held by Cooperman since the second quarter of 2012 (see the full history here). Like the mythological origin of its name suggests, Chimera is a multi-faceted REIT that invests in residential MBS and different types of mortgage loans and it breaths quite a bit of fire with a 12% dividend yield.

Although quarterly dividend payments have fluctuated in value, they’ve been consistent in presence, and free cash flow has more than doubled over the past two years. On average, Wall Street expects funds from operations to grow by 5% to 6% a year over the next half-decade, but be aware that FFO has missed analyst targets in four of Chimera’s past five quarters. Even with the volatility, there’s no denying this REIT’s ridiculously attractive yield.

Atlas Pipeline Partners

Keeping Cooperman’s big bet on Atlas Energy in mind, it’s no surprise that the billionaire is also bullish on another MLP affiliated with the company, Atlas Pipeline Partners (APL). The natural gas processor is the 14th largest holding in Cooperman’s equity portfolio, and shares have had a solid year, up 20.8%.

In comparison to Atlas Energy, Atlas Pipeline’s focus as a full-service midstream company has allowed it to generate about twice the cash as its aforementioned ally, and thus, a higher dividend yield. Atlas Pipeline currently offers a yield of 6.5% on its shares and dividend payments have grown in five consecutive years. 

A couple more

We haven’t even discussed KKR and SandRidge yet. The latter is another oil and gas E&P, but unlike some of Cooperman’s other picks in the energy sector, SandRidge does not currently pay a dividend. With earnings growth of more than 40% expected this year alone, however, there’s much more momentum behind any bullish thesis here, and shares are actually pretty cheaply valued at 1.6 times book and a close parity on a price-to-sales basis.

Cooperman has held SandRidge stock since the fourth quarter of 2012 and depending on when he bought in, he could have booked as much as a 15% return so far on his investment.

KKR Financial, meanwhile, sits just inside Leon Cooperman’s 15 largest holdings and offers a whopping dividend yield of 8%. Yes, they’re up only 3.5% over the past year, but shares of KKR Financial are extremely attractive because of their depressed valuation; they trade at less than 7 times forward earnings and a price-to-earnings growth ratio of a mere 0.6. With double-digit annual earnings growth expected over the next five years and positive free cash flow, dividends appear sustainable.

Disclosure: none

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How George Soros Plays The Stock Market

The following article was written by our guest author Insider Monkey. Opinions of George Soros vary depending on whom you ask, but there’s no arguing against the Hungarian-American hedge fund manager’s investing pedigree. Earlier this month, Soros shared his thoughts on the Eurozone crisis at the Global Economic Symposium, and most of the usual headlines that surround the billionaire are focused on his macroeconomic views.

That’s all fine and dandy. We’d like to point out, though, that George Soros’ Soros Fund Management does maintain a $9 billion equity portfolio too. Due to the market-beating potential of hedge funds’ best stock picks (discover how we returned 47.6% in our first year), it’s useful to understand how a prominent investor like Soros is playing the stock market.

At the end of last quarter, George Soros and his management team disclosed a little over 200-equity holdings, with 15% of their capital allocated to their top five stock picks. This level of concentration is not uncommon for a large hedge fund, but a few of the specific names may surprise you.

Google

Other than Google [GOOG], that is. It’s really not very difficult to understand why the tech company is Soros’ No. 1 stock. Google was hedge funds’ favorite pick in the latest round of 13F filings, ahead of AIG [AIG] and Apple [AAPL]. Aside from offering a bevy of long-term product innovations like self-driving cars or smart thermostats, more immediate catalysts are the launch of the Moto X and next year’s release of Google Glass.

Both devices play into Wall Street’s bullish earnings estimates for Google, in which it expects 17% to 18% EPS growth in 2014 and 15% annual growth over the next half-decade. This trumps peers like Yahoo [s:YHOO] and even Apple. In addition to Soros’ bullishness, big-name fund managers Ray Dalio and Israel Englander have initiated Google positions in the last few months.

J.C. Penney

This is what we meant when we said you might be surprised. J.C. Penney [JCP] represents everything Google does not: poor market performance in 2013, high CEO turnover, an inconsistent business plan, and an uncertain future. The retailer is going back to its pre-Ron Johnson coupon strategy, which leads some to believe that it can recapture most of its old customers, and is thus undervalued at current levels.

It’s easier to be skeptical of this move than it is to support a bullish thesis, so we have a rare case where Soros is acting as a contrarian by betting on a stock rather than against it. Assuming you are for a turnaround here, J.C. Penney trades at a mere 0.15 times sales, but earnings will have to pick up. Longs can’t take many more monumental bottom line whiffs. Last quarter the retailer missed sell-side estimates by 88%, and in the first quarter of the year, EPS fell short of consensus by 36%. In fact, J.C. Penney has been in the red for a year and a half now.

A few days ago, Richard Perry cut almost half of his position in the retailer and last month, Bill Ackman liquidated his entire stake. What’s so notable about both of these moves is that Ackman’s hedge fund had the largest stake in J.C. Penney at the end of last quarter while Perry was third.

The remaining three

After the antithetical duo of Google and J.C. Penney, Soros’ next largest holdings are Herbalife [HLF], Charter Communications [CHTR] and Johnson & Johnson [JNJ].

While Ackman and Carl Icahn continue to feud about the legitimacy of Herbalife’s marketing practices, George Soros continues to book gains. Since we know that he held shares of the company on the last day of June, it can be inferred that Soros has made at least a 51% return on his long position. If he initiated the stake earlier in the second quarter, like in early May for example, this return stretches to more than 70%. Either way, the billionaire has to be happy that it represents one of his biggest holdings.

Charter Communications, meanwhile, is another stock that is up big (+72%) in 2013. The cable entertainment company has been a long-term pick for Soros, sitting in his clutches since early 2011. The same can be said for Johnson & Johnson, which has been in Soros’ equity portfolio for exactly four quarters. Johnson & Johnson is a prototypical dividend-payer that has actually offered double-digit capital gains this year, while Charter is a growth play plain and simple.

All in all, the variety presented in George Soros’ five largest stock picks is truly one of the best things about this group. Google, J.C. Penney and Herbalife are the three we’ll watch the closest going forward, particularly when new 13F filings come in mid-November.

Disclosure: none

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100 Most Bought Stocks By Investment Gurus

100 most bought stocks by investment professionals originally published on Dividend Yield – Stock, Capital, Investment. I love it to see how the big investors act on the market. Some of them have a really interesting and creative investing strategy which works only with huge amounts of capital.

Some hedge funds play with money and try to boost its return by ignoring a good diversification. But if they know the business and management team the risk might be lower as for desk research investors like us.

However, each month I publish a little list about the largest stock buys from 49 super investors. I analyze how often a stock was bought over the recent six months and ranked them in my 100 best guru buy list. All super gurus combined bought 655 stocks within the recent half year.

In my view, it’s a good tool to look at the activities of guru investors in the market because they have big money in their pockets and if they invest combined, they could change the market very easily.

Their attitude to stocks is also lightning the way to return, not always but sometimes because the media notices the portfolio changes of the hedge fund managers and create additional publicity.

Technology is still the place to be for the investment guru’s. I think that they have noticed the huge cash reserves of Apple and the other stocks. Not enough, most of them are very profitable and grow further despite they don’t have new technologies developed.

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Carl Icahn’s Best Pick Isn’t Apple…These Stocks Are! - How The Big Investor Makes Money

The following article was written by our guest author Insider Moneky. Carl Icahn may have lifted the company’s market cap by $20 billion in less than two days of trading last month, but Apple [s:AAPL] isn’t his best stock pick. There are four positions in the multi-billionaire’s equity portfolio that are worth looking at before Cupertino. We’ll show you which ones and explain why.

At the end of last quarter, Carl Icahn’s hedge fund held long positions in 19 different companies totaling a market value of $21.5 billion. With Icahn’s pedigree as an elite activist investor, it’s not surprising that he’d have that much money in U.S. equities, but it is a bit intriguing that four of his eleven largest picks are small-caps.

According to our research at Insider Monkey, hedge funds’ small-cap picks have the highest potential to outperform the market over a sustained period of time. Our premium newsletter, which employs this strategy, beat the S&P 500 by nearly 30 percentage points in its first year (discover how we did this here).

With that in mind, let’s run through the four largest small-cap investments in Icahn’s equity portfolio. Each stock had a market cap between $1 billion and $5 billion at the end of the last 13F-filing period.

CVR Energy [CVI] is Icahn’s largest small-cap holding, and his stake comprises more than four-fifths of its outstanding shares. After grabbing exposure in CVR Energy last year, Icahn’s initial goal was to push for a sale of the company to a larger buyer. Once this move failed, he then guided CVR to spin off its refining subsidiary in January. In his last filing, Icahn held $3.6 billion in CVR Energy stock and $138 million in the spinoff, CVR Refining [CVRR].

The latter has returned just 0.2% post-IPO, but CVR Energy shares are up almost 70% since Icahn first established his stake in early 2012. The bet has been very profitable for Icahn, and with gushing refining margins in its last few earnings reports, there may be more appreciation on the horizon for CVR Energy.

Federal Mogul [FDML], meanwhile, is another high-flier in Icahn’s equity portfolio. The hedge fund manager’s second largest small-cap holding has been a key investment since 2011. In the summer of that year, Icahn established his original position in the auto part maker, and he has held a controlling interest ever since. Shares of Federal Mogul are up a whopping 177% in the past six months on the back of a massive earnings beat last quarter and a fairly extensive restructuring program.

Herbalife [HLF] needs no introduction, and is the next largest-small cap in Icahn’s portfolio. The multi-level marketer had a market cap below $5 billion at the end of last quarter, but its value has since risen by about 50%. Over the longer term, Herbalife shares have more than doubled since the start of 2013, and the market hasn’t been convinced by Bill Ackman’s “pyramid scheme” accusations (see his full presentation here).

Icahn has shown no hesitation to call out Pershing Square’s manager for being “totally wrong” and “ridiculous” in his words, but Ackman hasn’t shown any signs of closing his short position in Herbalife. As for Icahn, he thinks the stock is still cheap at current levels.

Hain Celestial Group [HAIN] is the next largest small-cap in the activist’s equity portfolio, and surprise, surprise, this stock is having a good 2013 too. Shares of the organic food and personal care product company are up 37% this year, and Icahn closed out his $470 million position a little over two weeks ago. Since he established his Hain stake in early 2010, the stock’s price has risen from around $22 per share to the upper $70 range.

As CEO Irwin Simon explains in a recent interview with CNBC, “Hain today is positioned better than it was when Carl got in … because of the awareness of healthy eating.” In other words, it’s the secular tailwinds—not just Icahn’s influence on a couple M&A moves—that have driven Hain’s appreciation. The organic boom doesn’t look like it will end any time soon according to the USDA, so we still like Hain Celestial post-Icahn.

Disclosure: none

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Ken Fisher’s Biggest Dividend Stock Buys And His Latest Portfolio

Ken Fisher’s stock purchases and his portfolio overview originally published at long-term-investments.blogspot.com. I often look at the activities of the big players because some of them know what’s hot on the market. One investment guru I would like to introduce here today is Ken Fisher.

Fisher has assets of around $38 billion under management and he owns around 500 stocks of which 45 were completely new in his portfolio.

Because of the huge number of assets he own, the transaction list is very long and none of his deals had a really huge influence to his portfolio. The biggest move on the long side was the purchase of the UBS Fisher ETN “UBS Fisher Enhanced Big Cap Growth ETN”.

From his 20 biggest long transactions pay 12 a dividend.

Ken Fisher is one of the most diversified guy's I’ve ever seen. The biggest portfolio position has a share of 2.7 percent and is reasonable to the Barclays ETN FI Enhanced Global High Yield ETN. Fisher owns 3 exchange traded funds in his top 20 positions with a total weighting of around 7.1 percent.

Beside ETFs, Fisher loves the Technology sector and bets on financial services stocks. All three categories represent around 47.4 percent of his assets.

Fisher reduced technology, energy and basic material stocks within the recent quarter. On the other side, he increased stocks from the financial services sector, healthcare and defensive consumer goods sector.

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Bruce Berkowitz’s Latest Stock Buys And His Full Portfolio Holdings

Bruce Berkowitz’s Fund Portfolio Strategies originally published at long-term-investments.blogspot.com. Bruce Berkowitz is also a well known guru investor. He is a hedge fund manager who cares about $7.69 billion in his asset management vehicle Fairholme Capital Management.

Within the recent quarter, Bruce made nine asset transactions of which six pay dividends. Four of the stock moves are attributable to the long side and five are on the short side.

In total, Bruce owns now only 13 share positions of which two were completely new (Lincoln National and Hartford Financial). In addition, he sold-out three stocks within the recent quarter. 

Financial stocks dominate his asset strategy. Around 68 percent of his total assets have a relationship to the financial sector.

The biggest position is his portfolio is reasonable to the insurer, AIG who represents around 50 percent of his full portfolio.

Nothing changed much in sum. Bruce made no big changes within the recent quarter. The highest trade impact on the long side had the 4.53 percent position increase of Sears Holdings.

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Is An ‘Activist Mutual Fund’ A Smart Investment?

The following article was written by our guest author Insider Monkey. At Insider Monkey, we use a number of techniques to track investment activity of hedge funds and other notable investors. Our research has shown that the most popular small cap stocks among hedge funds, as determined by quarterly 13F filings, earn an average excess return of 18 percentage points per year (discover the details of our small-cap strategy). Last summer, we put this theory into practice by publishing a portfolio of the most popular small caps and since inception this portfolio has beaten the S&P 500 by 29 percentage points.

The activist

Investors can also receive more up-to-date information about what hedge fund managers are doing through 13D and 13G filings. 13Ds are also known as activist filings—when a hedge fund such as billionaire Carl Icahn’s Icahn Capital or billionaire Bill Ackman’s Pershing Square files a 13D as opposed to a 13G, it usually signals that it intends to push management to make changes at the company either privately or publicly. While activist campaigns do not always work, often these managers are successful in getting a company to sell itself, spin out a non-core business unit, return more cash to shareholders, or take other actions that increase shareholder value.

They also may benefit from improvements in general market conditions that push up the stock price, as with any other hedge fund investment. The combination of these factors sometimes results in high average returns: Icahn, for example, tends to have done well with his 13D filings in the past couple of years.

Meet one 13D Activist Fund

Northern Lights Distributors, LLC has launched a long-only fund (the 13D Activist Fund) whose managers select stocks from the universe of activist positions. While the fund has a limited performance history, it has outperformed the S&P 500 year to date with a return of 26% compared to the index’s total return of 18%.

The 13D Activist Fund also notes that third-party academic research shows superior performance for activist targets and this is not entirely captured by a pop in the stock price immediately following the announcement. For example, “a further significant increase in share price” occurs after the filing date according to one study on the returns from activism.

To capitalize on this finding, the 13D Activist Fund specifically seeks to take positions in activist targets from a variety of managers, targeting “20 to 40” holdings. For purposes of comparison, Icahn’s most recent 13F only included a total of 19 positions, and some of these were in smaller-cap stocks (the 13D Activist Fund targets stocks with market capitalizations of at least $1 billion) or in companies where he was not making activist moves.

As a result, by construction its portfolio should incorporate ideas from several activists rather than mimicking any particular fund’s portfolio. The fund managers acknowledge that there is little fundamental analysis involved in their strategy; they prefer to defer on that point and analyze the activist investor’s record directly in determining the likelihood of positive returns.

To do this, they analyze both the overall track record of an activist as well as his success in a particular industry or sector; activists who have historically struggled in tech investments might be ignored if they file a 13D on a tech stock. They also evaluate the activist’s plans for creating change at the company. Different activist techniques might be judged more or less likely to succeed.

Recent data

Its most recent publicly disclosed data shows that the 13D Activist Fund’s three largest holdings were Jack in the Box Inc. (NASDAQ:JACK), where Blue Harbour Group has been engaged in an activist strategy for about three years; Valeant Pharmaceuticals Intl Inc (NYSE:VRX), one of the top holdings of Jeffrey Ubben’s ValueAct Capital, and Canadian Pacific Railway Limited (USA) (NYSE:CP), which has more than doubled in the last two years as Ackman has succeeded in transforming the railroad.

Motorola Solutions Inc (NYSE:MSI), another ValueAct holding, and Ackman favorite BEAM Inc (NYSE:BEAM) rounded out the fund’s top five picks. Looking at the rest of its top holdings, it appears that other activists the fund tracks include billionaire Paul Singer’s Elliott Management, Keith Meister’s Corvex Capital, and Richard McGuire’s Marcato Capital Management.

Final thoughts

Given the combination of the fund’s performance and the academic research supporting the concept of imitating activists, the basic concept involved seems to be a good one particularly for investors who are looking for assets with a low correlation to the overall market.

The question is which of the following would be the best way for an interested investor to participate: buy into the fund and pay its fees (likely the only way for most investors to access the entire portfolio of activist opportunities), watch for its public reports and directly buy some of the stocks the managers choose (which has a considerable delay), or follow 13Ds oneself and directly research these for attractive single-stock investments.

Disclosure: I own no shares of any stocks mentioned in this article.

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