Under the Radar: Quiet Portfolios, Loud Returns

Last week, instant Experts of the Internet took a few minutes off their duties as Global Trade and Monetary Policy Experts to share their insights on the information gleaned from the latest round of 13F filings at the SEC.

The Clickbait Delivery Vehicles masquerading as financial media took a hot second to refrain from delivering forecasts of the financial collapse of the Western world and almost guaranteed strategies for becoming fabulously wealthy by next Tuesday to do the same.

Although more than 6,000 or so money managers, institutions, and hedge funds have over $100 million in assets and are required to file a list of their holdings at the end of every quarter, the media and the Instant Experts will focus on about ten of the best-known investors to deliver their life-changing advice.

I will read the filings from Warren Buffett, Carl Ichan, Seth Klarman and other well-known and ridiculously successful investors to see what they are up to.

I might even build a watch list of a few ideas to put on a market crash watch list.

However, making a practice to steal the same ideas that a few million other people will also be buying creates no edge and little chance of the ever-elusive excess profits which we seek.

I have been perusing 13F filings since the late 1980s. Back in the pre-Internet days, we had to wait until the end of the day (or the weekend) and use the Quotron machine and print the filings out on the dot matrix printers in the back room of the office.

Using them during the day was out of the question as they took forever to print.

We would then go through the filings and compare them to last quarter, using a yellow highlighter to mark changes.

It was a tad tedious but very few people were doing it, and it was wildly profitable to steal ideas from the best investors on the planet.

As time went on, it became easier to access and compare the information and develop ideas.

While one would think that would mean it became more difficult to profit from stock piracy, that never happened.

The same technology that made accessing information easier led to the rise of the instant expert and the soundbite.

You could have made a lot of money over the last couple of decades tracking the holdings of Donald Smith and Company.

The firm is way off the radar screen but has used a deep value investment approach to soundly beat the indexes.

It took more work than logging onto social media or watching market wrap soundbites, but it has paid off with market-beating returns.

Here are the top five stocks the firm bought in the first quarter of the year:

Park Hotels & Resorts PK is a publicly traded lodging REIT focused on owning and operating high-quality hotels and resorts primarily in major U.S. markets. The portfolio is heavily weighted toward urban full-service hotels and is currently undergoing a strategic repositioning to improve profitability following post-pandemic demand shifts.

The shares trade at 62% of book value.

Harley-Davidson is an iconic American motorcycle manufacturer known for heavyweight touring and cruiser bikes, with operations split between motorcycles and financial services. The company is focused on revitalizing its brand through premium product offerings and global expansion, while managing declining U.S. ridership demographics.

The stock trades at 93% of book value.

Eldorado Gold EGO is a Canadian-based mid-tier gold producer with mining, development, and exploration operations in Turkey, Canada, and Greece. The company emphasizes long-life assets with low all-in sustaining costs and maintains a conservative balance sheet to fund organic growth.

The shares trade hands at just 90% of asset value currently.

Hudbay Minerals HBM is a diversified Canadian mining company primarily engaged in the production of copper, zinc, gold, and silver through assets in North and South America. The firm recently expanded copper production capacity in Arizona and remains highly leveraged to global base metal demand.

The stock trades at 1.2 times book, so you might want to wait for a pullback to be a buyer.

Nomura Holdings NMR is Japan’s largest investment bank and brokerage, offering global financial services including asset management, trading, and investment banking. While deeply rooted in the Japanese market, Nomura has sought international growth, particularly in the U.S. and Europe, amid a challenging interest rate and competitive environment.

I am a huge Japan bull and have recommended Nomura shares on several other occasions. The stock is trading at just 75% of book value.

If you want something with a little more zing to it, consider focusing your idea piracy on the portfolio of Shannon Fund Partners.

Shannon was set up by investor Spencer Waxman back in 2003 to invest in high tech stocks. Waxman and his team look for mispriced growth opportunities and disruptive trends within the technology, media, and telecommunications sectors.

Based on their track record, they are really good at it as they have averaged 20% a year over the last decade.

Shannon Fund’s top five purchases in the quarter were a little more adventurous.

Qorvo QRVO makes the chips that help your phone talk to the cell tower and your car talk to, well, everything else. Business has been steady, and they just dropped a solid earnings report showing strength in mobile and defense. With a recent acquisition (Anokiwave) boosting their 5G and military offerings, there’s a good chance this name keeps climbing the radar of long-term growth investors.

Elastic ESTC is the company behind Elasticsearch — the kind of search tech that powers apps, websites, and cybersecurity tools. They’re shifting more of their revenue into the cloud, and that part of the business is growing like a weed, now making up more than half of subscriptions. With AI and observability tools becoming more essential, Elastic has a clear runway to keep expanding in the enterprise space.

Wix WIX is what your cousin used to build their food truck website, and what marketing teams now use to spin up slick pages without writing code. Revenue is growing in the double digits, and their Partners business (think: pros who build sites for others) is leading the charge. Add in a dose of AI, and Wix looks like it’s quietly becoming the toolkit of choice for the modern web.

Zoom ZM isn’t just the pandemic darling anymore, it’s trying to grow up into a full communications platform for work. Enterprise sales are driving modest growth now, and Zoom is betting big on AI collaboration tools to stand out in a crowded space. It’s no longer a hypergrowth story, but it’s a business with staying power and an evolving product line.

Tower TSEM makes the behind-the-scenes chips that go into everything from industrial equipment to wireless gear. The last quarter showed decent revenue growth, and management sees steady improvement through the rest of the year. It’s not flashy, but Tower is a steady operator in a part of the chip world that doesn’t get enough love.

There is a lot of money to be made stealing ideas from the best money managers and hedge fund types if you avoid the headlines and focus on the under-the-radar folks putting up big numbers.