In 2012, the star performer among sectors was the financial sector. In 2013, it was consumer discretionary stocks. For 2014, which sector can we expect to top the list? #-ad_banner-#While the future is impossible to predict with certainty, we can identify the latest, forward-thinking trends of investing gurus.        I looked at the 20 highest-earning asset managers and their common holdings, position sizes, and latest portfolio moves. After screening over 27,000 declared positions, a common theme for 2014 emerged: invest in dividend-yielding health care stocks. (My colleague Joseph Hogue profiled his favorite side play in this… Read More

In 2012, the star performer among sectors was the financial sector. In 2013, it was consumer discretionary stocks. For 2014, which sector can we expect to top the list? #-ad_banner-#While the future is impossible to predict with certainty, we can identify the latest, forward-thinking trends of investing gurus.        I looked at the 20 highest-earning asset managers and their common holdings, position sizes, and latest portfolio moves. After screening over 27,000 declared positions, a common theme for 2014 emerged: invest in dividend-yielding health care stocks. (My colleague Joseph Hogue profiled his favorite side play in this space earlier this week.)   More specifically, investors such as Warren Buffett, Ken Fisher, and Donald Yacktman have gone big on Big Pharma. Three stocks in particular each found a home in nearly half or more of the portfolios I scoured. What could be the main driver for such heavy investment into pharmaceutical stocks going into the end of last year? The answer is simple: the Affordable Care Act.  With the deadline to register being well-advertised over the past year, money managers were ahead of the curve and stocked up on drugmakers. For good reason too, as the government exceeded… Read More

Being the “little guy” in the markets is never easy, it seems. #-ad_banner-#The recent airing of a “60 Minutes” special concerning high-frequency trading (HFT) and Michael Lewis’ new book, “Flash Boys: A Wall Street Revolt,” went into detail on how retail investors are being duped by this new wave of algorithmic gurus and computer experts. Lewis’ book has sparked controversy across the investing community, with the “Liar’s Poker” author claiming the stock market is “rigged.” Some high-frequency firms argue the heat is unwarranted, saying they provide liquidity and keep fees down. Just how bad investors are being affected… Read More

Being the “little guy” in the markets is never easy, it seems. #-ad_banner-#The recent airing of a “60 Minutes” special concerning high-frequency trading (HFT) and Michael Lewis’ new book, “Flash Boys: A Wall Street Revolt,” went into detail on how retail investors are being duped by this new wave of algorithmic gurus and computer experts. Lewis’ book has sparked controversy across the investing community, with the “Liar’s Poker” author claiming the stock market is “rigged.” Some high-frequency firms argue the heat is unwarranted, saying they provide liquidity and keep fees down. Just how bad investors are being affected and just how much money is being made from HFT practices have been debated since the program aired. Ignoring the noise and concentrating on the actual problems present in the market’s current structure, increased complexity and poor regulation are two real drivers that have had a tangible malevolent impact. While attempts have been made in the past to level the trading playing field, the end result has often been segmentation, reduction in liquidity — and fatter pockets for those who created the “solution.” That is, until now. A large component of the “60 Minutes” special outlined the debut of a… Read More

Since the 1980s, one of the most well-known and heavily used strategies among hedge funds and portfolio managers has been pairs trading. #-ad_banner-#Classified as a market-neutral trading strategy, pairs trades attempt to do away with the unpredictable up and down moves of the overall market that often take individual stocks with them. Instead, those who employ a pairs trade aim to isolate the movement between two similar companies. In a properly hedged pair, an investor goes long on one stock and short on the other. Thus, when the market goes up, the long position follows suit… Read More

Since the 1980s, one of the most well-known and heavily used strategies among hedge funds and portfolio managers has been pairs trading. #-ad_banner-#Classified as a market-neutral trading strategy, pairs trades attempt to do away with the unpredictable up and down moves of the overall market that often take individual stocks with them. Instead, those who employ a pairs trade aim to isolate the movement between two similar companies. In a properly hedged pair, an investor goes long on one stock and short on the other. Thus, when the market goes up, the long position follows suit and profits, while the short loses money (and vice versa when the market falls). The relationship between the two stocks (known as a spread) will influence whether the overall position prospers or not. To profit from this strategy, you have to choose good pairs in the same industry with similar business models and a consistent, historical relationship. One of the most prevalent and oft-researched pairs relationships has remained between the world’s two largest payment processors, Visa (NYSE: V) and MasterCard (NYSE: MA). These two financial transaction companies are roughly the same size, ($120 billion to $140 billion in market cap),… Read More

Few hedge fund managers can lay claim to keeping their doors open for over 20 years. Even fewer have grown to manage billions or more, putting billions in their own pockets in the process. Perhaps most impressive, only a tiny percentage of them have done this all before the ripe old age of 50.   #-ad_banner-#At 45 years old, Ken Griffen has proved himself many times over in an industry where money talks. Griffin founded Citadel, one of the most recognized and successful funds in the world, in 1990. With an estimated net worth of $5.2 billion, Griffen has been… Read More

Few hedge fund managers can lay claim to keeping their doors open for over 20 years. Even fewer have grown to manage billions or more, putting billions in their own pockets in the process. Perhaps most impressive, only a tiny percentage of them have done this all before the ripe old age of 50.   #-ad_banner-#At 45 years old, Ken Griffen has proved himself many times over in an industry where money talks. Griffin founded Citadel, one of the most recognized and successful funds in the world, in 1990. With an estimated net worth of $5.2 billion, Griffen has been besting his fellow competitors and providing excellent returns to his clients for decades.   Citadel has been shaking up its portfolio recently with the addition of a number of real estate stocks, many of them homebuilders. Mortgage rates have continued to remain low, with existing home inventory and building supply lagging since the recession. Add in new highs for home prices in burgeoning markets such as Texas, and you have the perfect cocktail for a rise in residential construction stocks.    These bullish positions have been disclosed in the past month through multiple 13D and 13G filings. These forms outline… Read More

In today’s world of high-frequency, short-term trading, many funds have sprung up that take positions based purely on statistics and for mere seconds (or less) at a time. Fundamentals get thrown out of the window; long-term appreciation and dividends are often never considered. #-ad_banner-#Traditional long/short hedge funds are still generating impressive returns using tried-and-true methods, however. Heavy research into valuation and commitment to investment ideas over a greater horizon will never go out of style. This type of investing mantra is suitable for the great majority of investors as well. Getting a peek into that research can be done each… Read More

In today’s world of high-frequency, short-term trading, many funds have sprung up that take positions based purely on statistics and for mere seconds (or less) at a time. Fundamentals get thrown out of the window; long-term appreciation and dividends are often never considered. #-ad_banner-#Traditional long/short hedge funds are still generating impressive returns using tried-and-true methods, however. Heavy research into valuation and commitment to investment ideas over a greater horizon will never go out of style. This type of investing mantra is suitable for the great majority of investors as well. Getting a peek into that research can be done each quarter when funds release their long positions in a filing called a Form 13F. While 13F data has its pros and cons, following managers who have demonstrated performance over a long-term horizon can lead to profitable investments. Warren Buffett, esteemed investor, founder and the largest stakeholder of Berkshire Hathaway (NYSE: BRK), is the polar opposite of a short-term trader. The Oracle of Omaha is a legendary buy-and-hold investor, which is why his filings can be so insightful. I’ve pored over Berkshire Hathaway’s 13Fs spanning the last 12 quarters with a few criteria in mind. First, find big-cap stocks that have… Read More

Among Wall Street’s greats, Carl Icahn is in a league of his own. #-ad_banner-#With the power to sway a stock’s price in 140 characters or less — see Apple’s (Nasdaq: AAPL) 9% increase last August after he announced a position via Twitter), the legendary activist investor is a forced to be reckoned with. The “Icahn effect” can lead to sentiment-driven price gains after he announces a position as investors scramble to follow his moves. Thanks to big returns from Netflix (Nasdaq: NFLX) and Herbalife (NYSE: HLF) in the past few years, Icahn’s net worth has skyrocketed to north of $20… Read More

Among Wall Street’s greats, Carl Icahn is in a league of his own. #-ad_banner-#With the power to sway a stock’s price in 140 characters or less — see Apple’s (Nasdaq: AAPL) 9% increase last August after he announced a position via Twitter), the legendary activist investor is a forced to be reckoned with. The “Icahn effect” can lead to sentiment-driven price gains after he announces a position as investors scramble to follow his moves. Thanks to big returns from Netflix (Nasdaq: NFLX) and Herbalife (NYSE: HLF) in the past few years, Icahn’s net worth has skyrocketed to north of $20 billion. He is looking to pad that number with his 12.5% stake in medical imaging company Hologic (Nasdaq: HOLX), disclosed last October. Could Hologic be Icahn’s next big winner, or will it continue its current trend of going nowhere fast? Hologic manufacturers and supplies diagnostic systems and tests, predominantly X-ray bone densitometers and ultrasound bone analyzers. These tests have large implications for women’s health care, specifically in the diagnosis and treatment of osteoporosis and cancer. Despite its promising intentions, Hologic has failed to turn a profit in five of the past six years. Most recently, the company reported a loss… Read More

Although Feb. 14 is better known as Valentine’s Day, it’s also a date of particular significance for investment managers. #-ad_banner-#For investment managers overseeing a fund with assets under management north of $100 million, Feb. 14 is the deadline to file a Form 13F with the SEC. The 13F outlines certain types of a fund’s assets, predominantly long exchange-traded positions, certain debt positions, and some equity options. Taken as a snapshot at the end of each quarter, these disclosures can give individual investors valuable insight into the minds of the investing elite. Although typically filed 45 days after the end of… Read More

Although Feb. 14 is better known as Valentine’s Day, it’s also a date of particular significance for investment managers. #-ad_banner-#For investment managers overseeing a fund with assets under management north of $100 million, Feb. 14 is the deadline to file a Form 13F with the SEC. The 13F outlines certain types of a fund’s assets, predominantly long exchange-traded positions, certain debt positions, and some equity options. Taken as a snapshot at the end of each quarter, these disclosures can give individual investors valuable insight into the minds of the investing elite. Although typically filed 45 days after the end of a quarter, some funds release their documents early. Bridgewater Associates recently did so for last year’s fourth quarter. Founded by legendary billionaire Ray Dalio in 1975, Bridgewater now commands roughly $150 billion in capital, a staggering amount that makes it the largest hedge fund in the world. Dalio’s own net worth has crept up to nearly $13 billion, according to Forbes. I’ve dug into Bridgewater’s 13F with two criteria in mind: Find stocks paying yields higher than 3%, and see which of the bunch were added to by the fund between the third and fourth quarters… Read More