Every quarter, many money managers have to disclose what they’ve bought and sold, via “13F” filings. Their latest moves can shine a bright light on smart stock picks.
Today, let’s look at Joel Greenblatt’s Gotham Asset Management. It’s of great interest to many investors because Greenblatt is the author of the well-regarded bestseller “The Little Book That Beats the Market” and because his system of seeking out companies with high returns on capital and hefty earnings yields. His “Magic Formula” has many fans. As my colleague Morgan Housel has noted, “The simple formula absolutely destroys market averages over time. Greenblatt backs this up with considerable statistical evidence.”
The company’s reportable stock portfolio totaled $1.7 billion in value as of Dec. 31, 2012.
So what does Gotham’s latest quarterly 13F filing tell us? Here are a few interesting details:
The biggest new holdings are Wells Fargo & Co (NYSE:WFC) and Computer Sciences Corporation (NYSE:CSC). Other new holdings of interest include American Capital Ltd. (NASDAQ:ACAS) , a business development company (BDC) that’s also involved in mortgage-backed securities. It was recently upgraded by analysts at Zacks who liked its expense and debt reduction and better-than-expected earnings. Some are hoping that the company will reinstate its dividend in the near future, as management has said it would like to do, but my colleague John Maxfield has warned that the company may be too inscrutable for most investors.
Among holdings in which Gotham increased its stake were RR Donnelley & Sons Co (NASDAQ:RRD) and InterDigital, Inc. (NASDAQ:IDCC) . Commercial printer Donnelley provides labels, packaging, and more to the private and public sector. It also prints many thousands of forms for the SEC, and bought Edgar Online. The company took some flack recently when it released Google Inc (NASDAQ:GOOG) ‘s earnings report early last year. Bears worry about its debt and fear a dividend cut. The dividend recently yielded a whopping 10%.
InterDigital may have disappointed investors by not being acquired, but it’s otherwise been busy raking in licensing revenue from its many patents (generally focused on mobile telecommunications), selling many of its patents, and also winning some significant legal battles. Also boding well for the company is its last earnings report, in which it handily topped expectations.