Just recently, iconic investor Warren Buffett said that investors should not mimic his investment picks or those of other highly-successful money managers. The Oracle of Omaha clearly asserted that imitating successful money managers is not necessarily a great investment strategy. Instead, the billionaire investor recommended that investors buy equities on a consistent basis over a lifetime, which is what he has been successfully doing over the past several decades. Nonetheless, there aren’t many investors who can afford the luxury of losing thousands of dollars before generating positive returns, so active stock portfolio management seems to be the right strategy for retail investors starting from a smaller investment base. But how can individual investors pick high-potential stocks? One way of finding some attractive stocks is to look through hedge funds’ 13G, 13D, and Form 4 filings, which reveal up-to-date hedge fund moves in some of their highest conviction picks. These SEC filings could definitely serve as a handy tool in analyzing and selecting securities that investors are expecting big things from, so individual investors should keep a close eye on these public filings. For that reason, this article will discuss four fresh filings submitted with the SEC by several renowned hedge fund firms.
Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see more details here).
According to a Form 4 filing, Dan Loeb’s Third Point LLC purchased 10,000 shares of Sothebys (NYSE:BID) on Monday at a cost of $21.93 per share, lifting its stake to 6.66 million shares. The freshly-upped stake accounts for 10.75% of the company’s outstanding common stock. It should be mentioned that Third Point has had an activist stance on the auction house operator since 2013, with Mr. Loeb’s firm gaining three seats on the company’s Board in 2014. The shares of the global art business are down by 45% over the past 12 months despite that, presumably because of a slowing art market. Privately-owned auction house Christie’s International PLC represents Sotheby’s main competitor in the global art market, and the two companies together registered auction sales of $12.3 billion in 2015, down from $12.9 billion in 2014. Sotheby’s net auction sales in 2015 totaled $5.02 billion, down from $5.15 billion in 2014. The auction house did however generate more revenue in 2015 relative to 2014 despite experiencing lower auction sales. Sothebys (NYSE:BID) revenue in 2015 reached $961.49 million, up from $938.05 million in 2014 and $853.68 million in 2013. On the other hand, the company’s reported net income decreased by 63% year-over-year to $43.7 million, mainly due to a $65.7 million non-cash income tax charge associated with the repatriation of foreign earnings.
Just recently, Barrington Research downgraded Sothebys to ‘Market Perform’ from ‘Outperform’, citing a slowing art market, and the departure of the some of the company’s top talent, among other things. The shares of Sothebys are trading at 11.73-times expected earnings, below the forward P/E ratio of 16.15 for the companies included in the S&P 500 Index. The smart money sentiment towards the stock was negative in the December quarter, as the number of money managers in our system with stakes in the company declined to 24 from 31 quarter-over-quarter. Richard McGuire’s Marcato Capital Management cut its stake in Sothebys (NYSE:BID) by 6% to 6.22 million shares during the fourth quarter.
The next two pages of this article discuss three separate SEC filings submitted by highly-scrutinized hedge fund vehicles.