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Stocks continue to make new highs – five consecutive days of higher highs in the Dow.  The Trump administration continues to make new news. And the Fed continues to become less important.  Those have been the  themes of the week.

Today was the deadline for all big money managers to give a public snapshot of their portfolios to the SEC (as they stood at the end of Q4). So let’s review why (if at all) the news you read about today, regarding the moves of big investors, matters.

Remember, all investors that are managing over $100 million are required to publicly disclose their holdings every quarter. They have 45 days from the end of the quarter to file that disclosure with the SEC. It’s called a form 13F.

First, it’s important to understand that some of the moves deduced from 13F filings can be as old as 135 days. Filings must be made 45 days after the previous quarter ends.

Now, there are literally thousands of investment managers that are required to report on a 13F.  That means there are thousands of filings.  And the difference in manager talent, strategies, portfolio sizes, motivations and investment mandates runs the gamut.

Although the media loves to run splashy headlines about who bought what, and who sold what, to make you feel overconfident about what you own, scared about what they sold, anxious, envious or all a combination of it all.   The truth is, most of the meaningful portfolio activity is already well known. Many times, if they are big stakes, they’ve already been reported in another filing with the SEC, called the 13D.

With this all in mind, there are nuggets to be found in 13Fs. Let’s revisit how to find them, and the take aways from the recent filings.

I only look at a tiny percentage of filings—just the investors that have long and proven track records, distinct approaches, and who have concentrated portfolios.  That narrows the universe dramatically.

Here’s what to look for:

  1. Clustering in stocks and sectors by good hedge funds is bullish. Situations where good funds are doubling down on stocks is bullish. This all can provide good insight into the mindset of the biggest and best investors in the world, and can be a predictor of trends that have yet to materialize in the market’s eye.
  2. For specialist investors (such as a technology focused hedge fund) we take note when they buy a new technology stock or double down on a technology stock. This is much more predictive than when a generalist investor, as an example, buys a technology stock or takes a macro bet.
  3. The bigger the position relative to the size of their portfolio, the better. Concentrated positions show conviction. Conviction tends to result in a higher probability of success. Again, in most cases, we will see these first in the 13D filings.
  4. New positions that are of large, but under 5%, are worthy of putting on the watch list. These positions can be an indicator that the investor is building a position that will soon be a “controlling stake.”
  5. Trimming of positions is generally not predictive unless a hedge fund or billionaire cuts by a substantial amount, or cuts below 5% (which we will see first in 13D filings). Funds also tend to trim losers into the fourth quarter for tax loss benefits, and then they buy them back early the following year.

As for the takeaways from Q4 filings, the best names had built stakes in financials.  That’s not surprising given that the Trump win had all but promised a “de-Dodd Franking” of the banking system, especially with the line-up of former Goldman alum that had been announced by late December.

The other big notable in the filings:  Warren Buffett’s stake in Apple.

Remember, as we headed into the Brexit vote last year, the broad market mood was shaky.  Markets were recovering after the oil price crash, and the unknowns from Brexit had some running for cover. Meanwhile, some of the best investors were building as others were trimming.  They were buying energy near the bottom.  They were buying health care.  And while many were selling the most dominant company in the world, Warren Buffett was buying from them.  The guy who has made his fortunes buying when others are selling, did it again with Apple.  He was buying near the bottom last summer, and in the fourth quarter he ramped up big time, more than tripling his stake to a $6.6 billion position.

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August 17, 2016, 3:45pm EST

We’ve talked about the recent public portfolio disclosures that have made in recent days by the world’s biggest investors.

And as we’ve discussed, the 13F filings only offer value to the extent that there is some skilled analysis applied.  Loads of managers file 13Fs every quarter.  And the difference in manager talent, strategies, portfolio sizes … run the gamut.

Through our research of over 15 years, among the most predictive factors in these filings is the presence of high conviction positions.  To put it simply, the bigger the position relative to the size of their portfolio, the better. Concentrated positions show conviction. Conviction tends to result in a higher probability of success, especially when the investor has a controlling stake and is influencing (or seeking to influence) management.  At that stage, these positions will show up first, before the quarterly 13F filing, in more timely filings called a 13D (or 13G) filings.

Here’s a look at a specific case that fits that profile, with some detail on why it matters.

If we look across high conviction positions among the recent 13F filings, among the highest, we find Carmike Cinemas (symbol CKEC).  Mittleman Brothers, a $410 million hedge fund and value investment advisor, runs a concentrated portfolio, and owns 9.6% of the CKEC.

The stake represents (as of the most recent 13F filing) more than 31% of its long U.S. equity portfolio (more than 18% of its overall portfolio).  That’s a huge stake.

After fees the Mittleman Brothers have returned 17% annualized since inception (2003).  So we have a manager that has doubled the S&P 500 over the 14 years, runs a concentrated portfolio, and has an ultra-high conviction stock in CKEC.  And in this particular case, they have the ability to influence the outcome in CKEC.

The fund filed a 13D on Carmike back in March, which means they intended to influence management. Mittleman has since been trying to block a sale of Carmike to AMC Entertainment Holdings for a value they deem “unacceptably low.”

At the time of the first takeover offer, the stock traded at just around $25 (so a $30 takeout would be a 20% premium).  The stock now trades at $31.  But based on industry multiples, Mittleman argues the company should be sold for no less than $40, and as much as $47.  The bid has since been raised, but remains at levels Mittleman has deemed unacceptable.

The moral of the story:  As we know, management’s mandate in public companies is to maximize shareholder value, but unfortunately it doesn’t always happen (most of the time, only after their interests are maximized).  That’s why siding with influential shareholders that are fighting to maximize your return on investment is critical.  In the case of Carmike, you have management that is willing to give away the company for as little as 70 cents on the dollar (according to view of one of its biggest shareholders).

In our Billionaire’s Portfolio, we’re positioned in deep value stocks that have the potential to do multiples of the broader market—all stocks that are owned and influenced by the world’s smartest and most powerful billionaire investors. Join us today and get yourself in line with our portfolio. You can join here.  


As we headed into this past weekend, we talked about the threat that the oil bust poses to the global financial system (not too dissimilar from the housing bust), and we talked about the prospect of central bank intervention over the thinly traded U.S. holiday (Monday).

Both the Bank of Japan and the European Central Bank did indeed go on the offensive, verbally, promising more action to combat the shaky global financial market environment.
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The result was a 9.5% rally in the Japanese stock market from Friday’s close. And all global markets followed suit. Within the white box in the chart below, you can see the central bank induced jump in the Nikkei (in orange) and the S&P 500 futures (in purple).

Source: Billionaire’s Portfolio

This is purely the influence on confidence by the two central banks that are now driving the global economic recovery (the BOJ and the ECB). However, the potency of the verbal threats and promises has been waning. Big words have marked bottoms along the way over the past several years for stocks, and the overall ebb and flow of global risk appetite. But it’s becoming more evident that real, bold action is required. And given that it’s cheap oil that represents the big risk to financial stability at the moment, we’ve argued that central banks should outright buy commodities (particularly oil). And we think they will.

Source: Billionaire’s Portfolio

In 2009, despite the evaporation of global demand, oil prices spiked from $32 to $73 in four months after China tapped its $3 trillion currency reserves to snap up cheap commodities. Within two years, oil was back above $100.

China’s role in the commodity market was a huge contributor to the recovery in emerging markets from the depths of the global financial and economic crisis. Brazil went from recession to growing at close to 8%. Many were saying emerging markets had survived the recession better than advanced markets, and that they were driving the global economic recovery. And Wall Street was claiming a torch passing from the developed world to the emerging world as the future of growth and leadership.

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How are emerging markets doing now? Terrible. Not surprisingly, it turns out the emerging market economies need a healthy developed world to survive. And now with the additional hit of the plunge in commodity prices, Venezuela (heavily reliant on oil exports) is very near default. Brazil and Russia are both in recession. The longer oil prices stay down here, Venezuela will be the first domino to go, and others will follow. With that, we expect intervention to come. And as you can see in the response to the Nikkei overnight, it will pack a punch – and if it’s bold, a lasting one. Remember, as we said last week, historical turning points for markets often come from some form of intervention (public or private policy).

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