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New Stocks the Gurus Are Buying - 13368 views
I love when a quarterly period comes to an end on Wall Street and the 13D and 13F filings come filing in, showing what the big players and hedge fund managers are doing with their portfolios. This is a fabulous period, when market players a chance to comb through these filings and look for stocks that legendary investors have been adding or selling.
A Schedule 13D is an SEC filing that must be submitted to the U.S. Securities and Exchange Commission within 10 days by anyone who acquires beneficial ownership of 5% or more of any class of publically-traded securities in a public company. The SEC also requires quarterly 13F filings from money managers that control more than $100 million of equities.
These filings are great windows into the minds of smart investors. They shed light on what the smartest money managers are doing with their money -- not just what they’re pontificating about in the media. I would much rather pay attention to how they vote with their money than what their general opinion is.
A great example of this can be found with billionaire investor George Soros. At an event in September, Soros said: “ Gold is the ultimate bubble. It is certainly not safe.” So why does he own so many gold positions in his hedge fund, Soros Fund Management?
While it’s true that he decreased his stake by 10% in the SPDR Gold Trust ETF (GLD), selling 547,689 shares and bringing his total position to 4.7 million shares, he still holds 705,000 call options on the GLD, which is one heck of a highly leveraged bet on gold. Nobody would want to own such a big derivatives bet on the GLD if they really thought gold was in a bubble and could crash at any moment. I would also like to point out that Soros’ GLD position is still his largest holding, according to the filings.
In addition, Soros added a brand new gold position with his purchase of 5 million shares of the iShares Comex Gold Trust ETF (IAU). He bought this gold ETF play between $11.37 and $12.81 a share. Soros also holds positions in gold miners NovaGold Resources (NG), Kinross Gold (KGC), Great Basin Gold (GBG) and Allied Nevada Gold (ANV). It looks to me like Soros wants to be long gold, and I don't believe that he sees that bubble bursting anytime soon.
What I really like to look for in new filings is what stocks the Wall Street whales are initiating new positions in. More important, I like to look at the strongest stocks that the smart money is buying. My belief is that many of these high-profile hedge fund managers and investors are true trend followers. I don’t care about the stocks at 52-week lows that these billionaires are buying; I want to see which market leaders, or potential new market leaders, that these savvy traders are loading up on.
So what are some of my favorite trend-following billionaires buying?
My favorite new purchase by George Soros are his stakes in biotech company Dendreon (DNDN) and communications company CenturyLink (CTL). Soros bought 1.82 million shares of Dendreon and 1.54 million shares of CenturyLink.
Dendreon is up 36% year-to-date and the company has a potential blockbuster cancer drug called Provenge that is coming up for possibly approval for coverage under Medicare. If Dendreon gets Medicare approval, this stock could skyrocket and start a run back towards its 52-week high of $57.67.
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CenturyLink is a true trend trader’s play since this name is around $42.50 a share, which is only 8 points off its all-time high of around $50 a share.
Paul Tudor Jones, who manages $11.5 billion hedge fund Tudor Investment, has been adding new positions in stocks such as Apple (AAPL), Google (GOOG), iShares MSCI Emerging Markets Index ETF (EEM) and the Oil Services HOLDRs (OIH).
Jones bought 364,800 shares of Apple between $239.93 and $292.32 a share, and he bought 93,800 shares of Google between $436.07 and $530.41 a share. I think Jones is loading up on these tech giants because he wants to have leverage to the global tsunami for smartphones and tablet devices such as the iPad, which are still in its infancy.
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To keep things in perspective, right now Apple has only a handful of its flagship retail outlets open in China. Google is still very early into launching its mobile operating system Android across the globe. What’s even better about these purchases is that both of these stocks are trading reasonably near their 52-week highs.
Tudor bought 6.5 million shares of the MSCI Emerging Markets ETF between $37.75 and $44.51 shares, and he bought 60,000 shares of the Oil Services Trust between $96.38 and $114.13 a share. My take here is that Tudor sees a ton of inflation coming down the road, which will benefit commodity prices. I think he’s loading up on the EEM because so many emerging market economies are heavily tied to the performance of commodities. Keep in mind that the second- and third-largest sector weightings of the EEM are basic materials at 18% and energy at 15%. Again, both of these stocks are very close to their 52-week highs, so Jones is buying strength and not weakness.
As for Warren Buffett, his only new holding during this reporting period was Bank of New York Mellon (BK), a global financial services company. Buffett bought about 2 million shares of BK between $24.16 and $26.85 a share.
Warren Buffett isn’t exactly a trend follower, as demonstrated by his notable stakes in lagging stocks such as Washington Post (WPO), down 12.5% year-to-date; General Electric (GE), up a paltry 4.8%; and Bank of America (BAC), down 22%. I know Buffett is a long-term investor and he might plan on holding these stocks forever, but at some point, doesn’t he want to own things that are actually going up?
What I like about Buffett’s new stake in Bank of New York Mellon is that he’s buying a strong bank stock instead of a laggard like Bank of America. Bank of New York Mellon is currently trading at about $28, just a few points off its 52-week high of $32.65 a share. So far in 2010, the stock is down about1.6%, but I would encourage market players to watch for a key breakout above $32 to $33 a share for this stock. A move above that level could mean that Bank of New York Mellon is ready to trend much higher -- and that Buffett could have a real winner here.
Jim Simons, who runs Renaissance Technologies, a New York-based hedge fund that he started in 1982, is considered to be one of the greatest traders in history. I love looking at what Simons is buying or selling because he is well-known as a top trend follower.
One of Simons' new positions this quarter was Chinese Internet search provider Baidu.com (BIDU). Simons bought 1.7 shares of Baidu.com between $67.45 and $103.82 a share, a move I love because Simons is loading up on a market leader that’s up 161% year-to-date. Baidu.com is currently trading at around $107, which is only around 8 points off its 52-week high of $115.04.
To see more of the new guru stock positions that are already trending in the right direction, check out the New Guru Stock Positions portfolio on Stockpickr.
At the time of publication, author had no positions in stocks mentioned.
Roberto Pedone, based out of Windermere, Fla., is an independent trader who focuses on stocks, options, futures, commodities and currencies. He is also an outside contributor to Beconequity.com and maintains the website Maddmoney.net, which he sold to Blue Wave Advisors in 2008. Roberto studied International Business at The Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany.