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13F Trends – Active Versus Stable Funds

What if we wanted to look at the difference in stock picking decisions between the most stable funds (those with the least amount of turnover) and the most active funds?   Let’s find out.  We’ll take the 10 funds with the least amount of turnover and compare holdings to the top 10 funds with the most turnover and then find the highest conviction stock picks from each group.

For the pool of filers to choose from I am going to include any filer that has at least two email alert registrations in Whalewisdom’s alert service.  The thinking here being that if there are users out there interested in knowing when a particular filer releases a 13f than that filer is likely interesting to us as well.  I’m also going to exclude funds that have more than 1,000 individual holdings to avoid the large institutional investors.

To calculate the turnover percentage we’re only counting newly opened positions or positions that are completely sold out.  Adding additional shares or reducing a position isn’t used in this calculation.

Here’s what we come up with:

Top 10 funds with least amount of turnover
Name Turnover Percentage
FIRST PACIFIC ADVISORS, LLC 0.0391
GLICKENHAUS & CO 0.0461
DODGE & COX 0.0575
HARRIS ASSOCIATES L P 0.0661
RGM CAPITAL, LLC 0.0667
FAIRFAX FINANCIAL HOLDINGS LTD/ CAN 0.0698
MSD CAPITAL L P 0.0833
BAUPOST GROUP LLC 0.0870
TWEEDY BROWNE CO LLC 0.0877
BERKSHIRE HATHAWAY INC 0.0882
Top 10 funds with most amount of turnover
Name Turnover Percentage
MATRIX CAPITAL MANAGEMENT COMPANY, LLC 1.0909
BALYASNY ASSET MANAGEMENT LLC 1.1134
HAYMAN CAPITAL MANAGEMENT, L.P. 1.1667
BRIDGEWATER ASSOCIATES, LP 1.1877
JHL CAPITAL GROUP LLC 1.3333
ARGONAUT CAPITAL MANAGEMENT CORP 1.3750
SOUND ENERGY PARTNERS, INC. 1.5000
ARTIS CAPITAL MANAGEMENT, L.P. 1.5288
CENTAURUS CAPITAL LP 2.0000
SOROS FUND MANAGEMENT LLC 2.7917

Now let’s plug these funds into the Guru Report to get a list of each groups highest conviction stock picks:

Top 20 picks from most stable group:
Stock Ticker Consensus:
% of Filers
holding this stock
Stock represents over 5%
of a Filer’s total holdings
WMT
70%
JNJ
70%
  • FAIRFAX FINANCIAL HOLD (21.23%)
  • TWEEDY BROWNE CO LLC (8.08%)
BK
60%
WFC
50%
  • BERKSHIRE HATHAWAY INC (15.99%)
  • FAIRFAX FINANCIAL HOLD (6.77%)
USB
50%
  • FAIRFAX FINANCIAL HOLD (6.55%)
PFE
50%
MSFT
50%
  • BAUPOST GROUP LLC/MA (9.34%)
KFT
50%
COP
50%
  • TWEEDY BROWNE CO LLC (7.23%)
TMK
40%
KO
40%
  • BERKSHIRE HATHAWAY INC (21.15%)
MCD
40%
IBM
40%
  • BERKSHIRE HATHAWAY INC (17.76%)
HPQ
40%
  • BAUPOST GROUP LLC/MA (14.48%)
GSK
40%
GE
40%
XOM
40%
CMCSK
40%
BRK-A
40%
BRK-B
40%
Top 20 picks from most active group
Stock Ticker Consensus:
% of Filer’s
holding this stock
Stock represents over 5%
of Filer’s total holdings
AAPL
50%
  • ARTIS CAPITAL MANAGEME (8.91%)
  • ARGONAUT CAPITAL MANAG (29.24%)
YHOO
30%
WCG
30%
WFT
30%
  • BALYASNY ASSET MANAGEM (5.21%)
  • SOUND ENERGY PARTNERS, (8.14%)
WMT
30%
  • JHL CAPITAL GROUP LLC (5.64%)
HD
30%
SPY
30%
  • BRIDGEWATER ASSOCIATES (43.98%)
SPY
30%
PFE
30%
LOW
30%
  • JHL CAPITAL GROUP LLC (10.84%)
HFC
30%
  • BALYASNY ASSET MANAGEM (5.78%)
HAL
30%
  • BALYASNY ASSET MANAGEM (6.12%)
  • SOUND ENERGY PARTNERS, (11.02%)
GOOG
30%
  • JHL CAPITAL GROUP LLC (6.04%)
ESRX
30%
ELN
30%
CME
30%
CIEN
30%
AET
30%
ZMH
20%
WMB
20%

So you can see there is a big difference in investing mentality.  The stable funds have a stronger conviction as to which stocks to own.  Bellwethers like Wal-Mart and JnJ and dividend paying old tech like Microsoft, IBM and Hewlett Packard are their stocks of choice.  The active funds  have much less conviction in their picks.   Non-dividend paying Apple, Yahoo, Google and Weatherford are all favorites, but there is much less consensus overall.

Now just for fun let’s plug those same groups into Backtester and backtest the performance for the past two years.

BackTester Report Summary for the Stable Funds

Overall Performance: 40.58%
S&P 500 Index Performance: 22.68%

BackTester Report Summary for Active Funds

Overall Performance: (4.35)%
S&P 500 Index Performance: 22.68%
Of course Backtester assumes all buy/sell transactions take place 46 days after the end of quarter date to simulate when the 13f data is released and digested by an individual investor so actual fund performance would be quite different.  While the stable funds did perform much better, the active funds performance was hurt mainly from big loses on Citigroup after Q2 2011 and Powerwave after Q3 2011.
Categories: Q42011
daniel: