Top Fund Buys: Facebook and Wells Fargo Rule
- By Rupert Hargreaves
This week has seen the deadline for hedge funds with more than $100 million in assets under management to file their 13F reports with the Securities and Exchange Commission.
These reports,which are filed with 45 days after the end of each calendar quarter, detail the equity positions held by hedge funds. They exclude cash and debt positions, so they only give a small snapshot of these firms' portfolios.
Warning! GuruFocus has detected 1 Warning Sign with WFC. Click here to check it out.
The intrinsic value of WFC
What's more, as these reports are backward-looking and only a snapshot of the portfolios at one point in time, they should not be relied upon for trading purposes. We don't know the reason for managers initiating the positions, and there is usually no further guidance given.
That being said, these reports do provide interesting insight into what companies hedge fund managers think are attractive in the current market and give us a guide as to the sectors and industries where the best minds in the business are currently allocating their capital.
Wells rules
According to the data, last quarter, Wells Fargo (WFC), Facebook (FB) and Goldman Sachs (GS) were the three top buys in the top 10 rankings. Wells Fargo is particularly interesting considering the reputational damage the business has taken over the past several years. This damage does not seem to have deterred investors, however. Even though Berkshire Hathaway (BRK-A) (BRK-B), which is one of the largest shareholders of the bank, reduced its position by 2%, Francis Chou (Trades, Portfolio)'s Chou Associates, Thomas Russo, Bill Nasgovitz, Tom Gayner (Trades, Portfolio) and Bill Millier all increased their holdings of the bank during the third quarter according to 13F filings.
Facebook, which has suffered its own reputational issues over the past six months, was another top buy. Pat Dorsey's Dorsey Asset Management boosted its position by 40%; Facebook now accounts for just under 19% of the portfolio. While David Tepper (Trades, Portfolio) and David Rolfe (Trades, Portfolio) reduced their positions in the social network, Lone Pine Capital, Sequoia, Bill Miller and Gayner all added.
Interestingly, Facebook makes it onto the list of both the most bought and the most sold stocks primarily because Lee Ainslie (Trades, Portfolio)'s Maverick Capital and Tepper's Appaloosa both owned more than 3 million shares before they started selling earlier in the year. These positions made the firms some of the social network's largest investors.
One of the most interesting trends by far in the data is the surge in hedge funds buying PG&E Corp. (PCG) in the third quarter. This Californian utility was, until this week, relatively low profile. This week, however, it has been speculated that the company's infrastructure started California wildfires, which have become the worst in the state's history. Management has told investors the total liabilities standing from this disaster could exceed its insurance coverage and all of the company's borrowing facilities.
It's too early to speculate at this point what this means for shareholders and the company overall, but the stock has already lost more than 50% of its value in the past two days as investors have jumped ship. One of the largest owners of the stock is Seth Klarman (Trades, Portfolio)'s Baupost. The firm holds just under $900 million of equity, which is around 6.9% of the Baupost equity portfolio. Assuming Klarman hasn't sold any of his investment, this implies a loss of more than $400 million for the highly respected value investor. Other value investors who have a position in PG&E are Tepper, Howard Marks (Trades, Portfolio) and Chris Hohn.
The stock that has the unenviable rating of being the most sold by hedge funds over the past six months is Altabab (AABA). Klarman is the only manager who has initiated a position in this company recently, acquiring just under 3 million shares. Other fund managers have been selling, including David Abrams (Trades, Portfolio), David Einhorn (Trades, Portfolio), Tepper and Marks.
Disclosure: The author owns shares of Berkshire Hathaway.
Read more here:
Facebook Treats Gurus on Halloween
What Would Warren Buffett Buy?
Two Legendary Investors Are Getting Crushed on This Stock
This article first appeared on GuruFocus.
Warning! GuruFocus has detected 1 Warning Sign with WFC. Click here to check it out.
The intrinsic value of WFC
