A Billionaire Guru Is Buying These 4 Stocks — Should You?
While ripe with actionable information, one of the primary drawbacks of SEC-required disclosures of funds’ holdings is that a delay can be present between the actual trade and the time of publishing.
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Such is often the case with 13F filings, which highlight long-only equity, debt and option positions of large asset managers. The SEC requires the forms to be filed 45 days after quarter’s end, which is why choosing which funds to follow is crucial. Managers who invest on longer horizons tend to keep portfolios that better mirror the ones outlined in a 13F.
However, some funds have been known to file early, which in effect gives investors a more accurate look at their snapshot portfolios with much less lag. It is not uncommon to see an asset manager load up on a stock a quarter prior as well, ahead of a merger closing or stock-moving news. Keeping in time with these portfolio plays could be the difference between a big win or missing the boat entirely (or worse, buying in after).
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| YouTube/Fisher Investments | ||
| With a net worth of $2.4 billion, Fisher and his team of analysts have a proven history of finding innovative ways to read and interpret the market. |
Ken Fisher of Fisher Asset Management has pushed his first-quarter 2014 13F out a number of days early — 24, to be exact. With a net worth of $2.4 billion, Fisher and his team of analysts have a proven history of finding innovative ways to read and interpret the market. When he talks, people listen — he is a financial guru by any definition.
I was excited to see his 13F published early and have taken a keen interest in some of his largest new positions, specifically those with smaller capitalizations. Fisher was in the minority of institutional money managers to offer small-cap investing to his clients in the 1980s, making him a pioneer in that space.
| Kate Spade & Co. (NYSE: KATE ) |
| Kate Spade & Co. was the biggest initiation made by Fisher Asset Management last quarter, commanding a $112 million investment from the firm. At a market cap of $4.2 billion, the apparel and accessories designer has seen incredible appreciation in the past year. A month ago, KATE was making new 52-week highs, although it has fallen 20% since. Similarly enough, the mean analyst price target is right at that same high, hinting that a resurgence back to those levels might be expected. Previously known as Fifth & Pacific Cos. (trading under FNP), Kate Spade has divested or shut down a number of its brands, leaving it with the high-growth Kate Spade platform, prompting the name change earlier this year. |
| Heartland Payment Systems (NYSE: HPY ) |
| Heartland Payment Systems is a $1.4 billion payment processor, catering its services to small- and mid-size merchants, as well as petroleum companies of all sizes. Heartland saw 1.75 million of its shares flow into Fisher’s portfolio, amounting to a $72.5 million investment. Similar to KATE, HPY peaked early this year and has been trying to gain its footing since. Analysts at Stifel Nicolaus are looking at the stock more favorably recently, bumping it up from “sell” to “hold” in mid-April. |
| Total System Services (NYSE: TSS ) |
| Total System Services also operates in the financial transactions services industry, hinting that Fisher is a fan of the sector. (This is affirmed by his other large holdings like Visa (NYSE: V) and MasterCard (NYSE: MA).) Although Total System Services is nearly four times the size of HPY by market cap, Fisher’s fund allocated slightly north of $10 million to TSS, a fair amount less than HPY. Total System Services reported earnings earlier this week, delivering misses on both revenue and earnings per share (EPS). This sent the shares down by over 4%, pushing the stock to some of its lowest levels this year. That means investors who get in now could possibly be getting better entries than Fisher did. |
| Aspen Technology (Nasdaq: AZPN ) |
| Aspen Technology rounds out the list of Fisher’s biggest new investments, with the process optimization software provider receiving $9.2 million of Fisher’s capital. AZPN clocks in at $3.6 billion in terms of market cap and has given steady, reliable share growth for years (up until this year, oddly enough). That could mean Fisher entered on a dip and is eyeing more growth from the stock. Aspen has a strong history of beating earnings and revenue expectations quarter after quarter, and it is set to announce its next quarterly results at the end of May. The Street has a bullish outlook for AZPN, setting a one-year mean price target that is 21% higher than current levels. |
Risks to Consider: Fisher’s small-cap picks are more speculative than, say, a retirement or public pension fund’s picks. The hedge fund clearly has sector preferences (such as payment processors) on a larger portfolio scale, so keep that macro picture in mind. Inflated price-to-earnings (P/E) ratios can be prevalent in high-growth small-caps, and many of the stocks listed above are susceptible to that (especially KATE and AZPN).
Action to Take –> While the advance notice of early reporting is a definite advantage in this case, Fisher Asset Management has billions of dollars to work with and could be executing trades with a much larger framework in mind. Keep these stocks on your radar — but never forget their speculative nature.
P.S. If you’re as bullish on these stocks as Ken Fisher, you might be interested in a new investing strategy developed by my colleague Michael Vodicka. He’s figured out how you can turbocharge the income you receive from some of the world’s most reliable stocks — without buying a single share. Follow this link to learn more.