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 Graham Capital Management, founded in 1994 by Ken Tropin and in the multistrategy macro-oriented hedge fund business. The overall company manages investments for endowments, foundations, sovereign wealth funds, global pensions, investment advisors, and wealthy individuals, among others.
The company’s reportable stock portfolio totaled $1.4 billion in value as of Dec. 31, 2012.
So what does Graham Capital’s latest quarterly 13F filing tell us? Here are a few interesting details:
The biggest new holdings and closed positions were exchange-traded funds (ETFs). Added were, for example, the iShares MSCI Switzerland Index ETF and the iShares MSCI Mexico Index ETF. Sold were the iShares iBoxx High Yield Corporate Bond ETF and the iShares MSCI Emerging Index ETF.
Other new holdings of interest include Halcon Resources Corp (NYSE:HK) and Pengrowth Energy Corp (USA) (NYSE:PGH). Oil and gas company Halcon has been growing by acquiring assets such as shale-field properties and is expected to grow by 30% annually in the next few years. Its net income and free cash flow have been modest or negative in the past few years, though.
Pengrowth has drawn some investors’ interest with its dividend yield north of 10%. It has struggled lately, with issues such as rising costs, and has cut back on its production a bit. My colleague Sean Williams sees it as a somewhat risky but also very promising portfolio candidate.
Among holdings in which Graham Capital increased its stake was Turquoise Hill Resources Ltd (USA) (NYSE:TRQ). Turquoise Hill is majority-owned by U.K.-based mining giant Rio Tinto plc (ADR) (NYSE:RIO) and focuses primarily on mineral mining in central Asia and Australia. Its Oyu Tolgoi mine in Mongolia is set to become one of the world’s largest copper producers. The $7 billion company used to go by another name, Ivanhoe Mines, and its stock is down about 50% over the past year, in part due to rising mine costs. A potential problem has recently arisen, however, in the form of an alleged financial scandal in Mongolia — interested investors should learn more before investing. Recently, Mongolia’s anti-corruption authority levied sanctions against a miner in which Turquoise Hill is a major investor.
Graham Capital reduced its stake in lots of companies, including Magnum Hunter Resources Corp (NYSE:MHR) . Oil and natural gas specialist Magnum Hunter sports an amazing average annual growth rate for revenue of more than 100% over the past five years — but free cash flow and earnings are still in the red, and increasingly so. Its share count has been rising sharply as well, reflecting dilution. The company has had some success in cutting its costs, though.