They say there is power in numbers, and when it comes to investing like the pros, that sentiment is right on the money.
The beauty of today's hedge fund regulations mean that managers are required to disclose their long positions every quarter, allowing investors of all sizes access to detailed insight into what a manager is holding.
Some of the disclosures are intentionally vague or "padded" to decrease transparency, but there are ways to glean actionable info from these filings, known as 13Fs. (My StreetAuthority colleagues and I have written about 13F's on several occasions already this year.) One of my favorite investment strategies is to collect the filings of a number of successful managers (read: billionaires) and see where their investing methodologies intersect.
Long-term investors like Warren Buffett have reaped the benefits of high-paying dividend stocks for years, and those securities should be favorites in the portfolios of those with a greater time horizon in mind. That said, I've gone through the most popular high-yielding stocks of 20 billionaire hedge fund managers to see where these gurus are finding respectable income in these markets.
|Transocean (NYSE: RIG)|
|Transocean stands out as the highest-paying stock on the list with a 5.7% yield. Unfortunately, from a growth standpoint, it's also the worst-performing stock over the past year (it has lost 19% versus the market's overall 17% gain). Transocean has been beaten up by the Street in recent months, pushing the stock to near 52-week lows. However, the drilling service provider saw an upgrade from Deutsche Bank this week, whose analysts contend RIG is oversold, pegging its price target at $45. Notorious activist investor Carl Icahn owns greater than 5% of RIG; his stake was worth more than $1 billion as of the end of last year.|
|AT&T (NYSE: T)|
|AT&T has been lagging well behind the market as well, down slightly over the past 12 months and flatlining this year. However, the $183 billion telecom has offered investors some reprieve in the form of a 5.2% dividend. Other good news has come in the form of an authorization to up the company's stock buyback from 125 million shares to 425 million shares, which amounts to roughly 8% of current outstanding shares. Jim Simons of Renaissance Technologies got his feet wet in AT&T in the final quarter of 2013 with a $100 million investment in the form of 2.8 million shares.|
|Verizon (NYSE: VZ)|
|Verizon is the second telecom to come up on my screen, offering a yield of 4.5% to investors and mirroring the same 12-month stock performance as its AT&T counterpart (not surprising, given the similarity in business models). The company continues to increase its coverage area in the U.S., most recently inking a $210 million deal to acquire spectrum licenses and tower lease obligations from Cincinnati Bell in Ohio. Citadel Advisors, headed by Ken Griffin, increased its stake significantly in the last two quarters of 2013, from 110,000 shares in the third quarter to over 900,000 by the end of the year.|
|ConocoPhillips (NYSE: COP)|
|ConocoPhillips rounds out the bottom of the list with a yield of 3.9%. While it may seem paltry compared with these other dividends, COP has seen strong price growth lately, beating the S&P's gain by nearly 7 percentage points over the past year. Analysts at Morgan Stanley think there is still more room to grow, pinning their price target at $85, representing upside of nearly 20% from current levels. Who's on the roster of outsized COP investors? Buffett's Berkshire Hathaway (NYSE: BRK-B), which reported a holding of over 11 million shares. That's a nearly $800 million investment according to COP prices at the end of last year.|
Risks to Consider: You don't always get the whole picture from 13F filings, which is why it is important to choose the managers you follow wisely. The form does not require short or international positions to be disclosed, which can be important parts of an overall portfolio or basket trade. To minimize these risks, use a discerning eye and cumulative screens such as the one employed above.
Action to Take --> Investors who favor bargain stocks may have their interest piqued by RIG, while COP may be the better choice for those looking to hold for the long term. Increased competition could plague the short-term growth of telecom, so I would seek opportunities elsewhere if the strong dividends of VZ and T are not enough to woo you.