How Star Investors Bet Last Quarter
Text High-profile money managers and investors zigged and zagged during the latest period, with a host of bank bets made or folded and with one investor tripling his stake in Comcast Corp. and another exiting from the cable company entirely.
Four times a year, many investors who manage more than $100 million are required to disclose holdings in certain types of securities, including stocks, within 45 days of the end of a given quarter.
Most hedge-fund managers and others wait until the last possible moment to make these filings, and the disclosures to the Securities and Exchange Commission cover the quarter ending Dec. 31.
The so-called 13F disclosures give the public a relatively fresh look inside the portfolios of major money managers such as Trian Capital's Nelson Peltz, SAC Capital Advisors' Steven Cohen and Berkshire Hathaway's Warren Buffett. They are often the investing public's first notice that closely watched figures have reversed course on a given sector or major company.
Warren Buffett's Berkshire Hathaway Inc. eliminated positions in several stocks in the fourth quarter, including Bank of America Corp., Nike Inc. and Fiserv Inc., as one of its longtime investment managers retired.
Berkshire also sold all its shares of Becton Dickinson & Co., Comcast Corp., Fiserv Inc., Lowe's Cos., Nalco Holding Co. and American depository receipts of Nestlé SA, according to a regulatory filing Monday.
Each of the positions Berkshire exited from appeared to be holdings of car insurer Geico Corp., a subsidiary whose portfolio was long managed by Louis Simpson, who retired from the company late last year. Mr. Simpson, who is in his 70s, worked at Geico for more than 30 years and had autonomy over the subsidiary's $4 billion stock portfolio.
The shares of the companies eliminated from the Berkshire portfolio in the last three months of 2010 had been worth about $1.2 billion at the end of the third quarter.
The stock sales are part of a passing of the guard to Todd Combs, a former hedge-fund manager who is taking over a portion of the investment duties at Berkshire. The 40-year-old Mr. Combs, who recently joined Berkshire as an investment manager, is expected to get $2 billion to $3 billion to invest initially.
Berkshire's $52.6 billion U.S. equity portfolio now includes just 25 companies, the fewest in several years. At the end of the third quarter, Berkshire held $48.6 billion in stocks after exiting from investments in firms including CarMax Inc., Home Depot Inc. and NRG Energy Inc., stocks that were in Geico's accounts.
The fourth-quarter increase in the size of the portfolio reflects substantial increases in the value of major holdings, including Wells Fargo & Co. and Coca-Cola Co.
Berkshire added to its holdings of Wells Fargo, its only addition to its giant portfolio in the fourth quarter. The stake rose about 1.8% to 342.6 million shares when calculated according to the Securities and Exchange Commission rules that govern the quarterly disclosure. Berkshire is the San Francisco bank's largest shareholder.
A separate filing late Monday showed that Berkshire and Mr. Buffett together owned 369.2 million shares as of Dec. 31. That figure appeared to include 10.9 million shares held by Mr. Buffett directly and stock owned by its employee benefit plans and subsidiaries not included in the other filing. Those holdings constitute 7% of Wells Fargo's outstanding shares.
Omaha, Neb.-based Berkshire reduced holdings of Bank of New York Mellon Corp. and Moody's Corp. Its Bank of New York stake fell 10% to 1.79 million shares, while Moody's declined 1.6% to 28.4 million. The sale of the Moody's shares was first disclosed in October.
Mr. Buffett's company, like other firms that control an investment portfolio of more than $100 million, is required to report its U.S. stock holdings 45 days after the end of a given quarter, giving the public its freshest possible glimpse at the investing decisions of the "Oracle of Omaha." The filing with the Securities and Exchange Commission is scrutinized by professional money managers and amateur investors alike, and Mr. Buffett's stock picks have the power to move the shares of the companies he's buying and selling.
But Mr. Buffett, Berkshire's chairman and chief executive, has long warned investors who want to piggyback on his stock picks that not all moves in the portfolio are his. While some of the company's investment decisions in past quarters have been Mr. Simpson's, now Mr. Combs will be managing a portion of the portfolio.
Mr. Combs, tapped for the job in October, was formerly a little-known hedge fund manager of a Connecticut hedge fund called Castle Point.
Berkshire's stakes in American Express Co., Coca-Cola and Kraft Foods Inc. remained unchanged. Mr. Buffett's firm appeared to remain the largest shareholder in each, though other money managers were also reporting the contents of their portfolios after the close of trading Monday, making an exact determination difficult.
—Erik Holm and Serena Ng
Investor Steven Cohen's SAC Capital Advisors LP, which has been wrestling with fallout from an insider-trading investigation, reported that it doubled its stake in Sprint Nextel Corp. in the fourth quarter and also loaded up on shares of Time Warner Inc., Comcast Corp. and DirecTV Group Inc.
SAC reported 1,843 holdings at the end of December, excluding exemptions. That is down from 1,871 at the end of September, though the portfolio gained value over the intervening months, ending December at $15 billion, up from $12.8 billion at the end of September.
Its holdings of Sprint jumped to 22.2 million shares, valued at about $101 million at Monday's closing price, from 11.8 million shares at the end of the third quarter.
In addition to Sprint, SAC substantially increased its stake in Time Warner, to 1,988,888 shares, valued at about $69.5 million at Monday's closing price, from 29,628 shares. Mr. Cohen also more than tripled his stake in Comcast, to 3.89 million shares, valued about $89.5 million, from a total of 1.04 million shares over two share classes.
He also loaded up on DirecTV, reporting 2.7 million shares, up from 11,651 at the end of September, worth about $116 million.
SAC Capital also reported a stake of 629,235 shares in Advanced Micro Devices Inc.); it had no stake in AMD at the end of the third quarter.
While adding to his positions in TV providers, he was unloading shares of BJ's Wholesale Club Inc., reducing his stake by 463,903 shares, to 1.1 million shares.
Mr. Cohen and his closely watched hedge fund have drawn scrutiny in recent months. Last week, two of SAC's former employees were ensnared in an ongoing federal probe of insider trading. A spokesman for the fund said last week the firm is "outraged" by the former employees' alleged actions and that it was cooperating in the investigation.
Appaloosa Management LP, the New Jersey hedge fund run by investor David Tepper, increased its bets on the four biggest U.S. banks during the fourth quarter and now holds more than $1.23 billion combined in the banks, according to a filing with the Securities and Exchange Commission.
Among its moves, the fund more than doubled its stake in Citigroup Inc. to more than 117 million shares, a holding that at Monday's closing price would be valued at $576.9 million.
The fund also reported a new stake in J.P. Morgan Chase & Co. valued at $25.2 million. Its stake in Bank of America Corp. rose 12% to 25.1 million shares, a value of $373.3 million, while its stake in Wells Fargo & Co. rose to 7.5 million common shares from 6.4 million and 335,482 preferred shares from 292,019. The common stake in Wells Fargo would be valued at $252.7 million at Monday's close.
The fund also boosted its stake in SunTrust Banks Inc. by 8.9% to 4.2 million, valued at $135.6 million and slightly raised its holdings in American Depositary Receipts of Spain's Banco Santander SA.
The fund trimmed its holdings in Fifth Third Bancorp by 8.4% to 9.5 million shares valued at $146.8 million. It also cut its stake in Capital One Financial Corp. common shares to 1.03 million, or $54.1 million, from 1.43 million shares.
Mr. Tepper specializes in distressed-debt investing and manages around $16 billion. He had a strong year in 2010 after turning optimistic about U.S. stocks before many hedge-fund rivals. According to a Wall Street Journal report, he made between $2 billion and $3 billion personally last year.
Mr. Tepper correctly anticipated the Federal Reserve's recent efforts to boost the economy, steps that have helped the market rally. The increased stake in Citi follows a highly publicized Citi investment by John Paulson of Paulson & Co., who took an early bet on Citi.
Among his other big moves for Appaloosa's quarter were increasing to the holdings in various airline carriers, as well as an already reported increase to Goodyear Tire & Rubber Co.
Many investors who manage more than $100 million are required to disclose most securities holdings within a month and a half of the end of a quarter. The filings give the public a relatively fresh look at the portfolios of well-known investors.
Investor Nelson Peltz's Trian Capital Corp. took on 2.8 million shares of Kellogg Co. during the fourth quarter while dumping shares of Bank of America Corp., J.P. Morgan Chase & Co. and U.S. Bancorp, according to securities filings Monday.
Mr. Peltz, who is well-known for his investments in the food and beverage sector, also sold his holdings of Dr Pepper Snapple Group Inc. In the third quarter, he held 1.4 million shares of the beverage maker, spread out over two of his funds.
The Kellogg stake was spread over three of his funds, according to the securities filings on Monday, which report holdings as of Dec. 31. Mr. Peltz said in the filings that confidential information was filed separately with the Securities and Exchange Commission; such confidential treatment allows him to withhold information about some investments.
His stakes in Wendys Arbys Group Inc. and H.J. Heinz Co. stayed the same. He increased his holding of Family Dollar Stores Inc. in the fourth quarter by 113,400 shares.
Mr. Peltz reported holding 2.9 million shares of Bank of America at the end of the third quarter, but reported no holdings of the stock at the end of December. Likewise, a previous 550,000-share stake in J.P. Morgan wasn't reported in the December-end filing. He also reported no holdings of U.S. Bancorp, in which he held 1.68 million shares at the end of the third quarter.
FrontPoint Partners, which late last year got caught up in an insider-trading probe related to a clinical drug trial, bought new stakes in Seagate Technology Inc. and J.P. Morgan Chase & Co. and dumped some health-care stocks, according to a securities filing Monday.
FrontPoint reported new stakes of 1.1 million shares of Seagate and about half a million shares of J.P. Morgan during the fourth quarter. Its new stakes in Seagate Technology and J.P. Morgan are valued at about $15.2 million and more than $24 million, respectively, as of Friday's close.
The Greenwich, Conn.-based hedge-fund firm, which is owned by Morgan Stanley, has been wrestling with fallout from the insider-trading probe for the past several months. The firm is also facing the possible departure of high-profile hedge-fund manager Steve Eisman, whose profitable 2007 bet that the housing market would collapse was chronicled in the book "The Big Short." The Wall Street Journal last month reported that Mr. Eisman was considering leaving.
In early November, prosecutors accused a French doctor of illegally alerting a fund manager with insider information about a clinical drug trial. FrontPoint has laid off the manager, Joseph F. Skowron III, and the rest of the health-care team. Morgan Stanley and FrontPoint have said they are cooperating with authorities and that they haven't been accused of wrongdoing.
Because of the probe, FrontPoint shed stakes in health-care stocks during the fourth quarter as it liquidated its health-care funds. Among the health-care positions eliminated were 1.9 million shares of GlaxoSmithKline PLC and 1.3 million shares of Aetna Inc.
It also disclosed it eliminated its positions in MasterCard Inc. and Visa Inc.
Morgan Stanley said in October that it planned to spin off FrontPoint. As part of the agreement, which was expected to close in the fourth quarter, FrontPoint's senior management and portfolio managers would own a majority equity stake. The insider-trading probe sent the plan into disarray.