New Stocks in Bill Miller’s $5.7 Billion Fund

Meena is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Bill Miller of Legg Mason Capital Management must comply with the same SEC regulations that all 400+ of the other hedge funds we track comply with as well, including the dissemination of a quarterly holdings disclosure known as a 13F. We pay close attention to these filings, as we have found some profitable tell-tale moves by smart money managers that retail investors can make use of. Our small-cap strategy, based on the most popular small stocks amongst hedge funds, is up over 29% since it was published last August (learn more here). With that analysis in mind, continue reading for our take on Legg Mason Capital Management’s largest new purchases as laid out in its most recent 13F filing for Q4 2012.

Facebook Inc. (NASDAQ: FB) is no stranger to many hedge fund’s portfolios; of the hundreds we track, sixty-seven professed to owning the social network in the last quarter of 2012. The stock has declined 27% since its IPO on the NASDAQ last May and has struggled to achieve the upwards traction pre-IPO investors were hoping for. The company is still making strides to advertise to its wide user-base; the latest revamping of its news feed offering is meant to be less subtle and more interactive, although user fatigue is becoming more and more of an issue. Billionaire Jim Simons of Renaissance Technologies purchased 5.6mm shares last quarter (view his top picks here).

Realogy Holdings Corp. (NYSE: RLGY) debuted on the NYSE in October of last year and has proven to be a large winner for those who got in at the time; the stock is up nearly 40% since then. The relocation and real estate service provider owns brokerage brands Century 21 and Coldwell Banker amongst others. RLGY was recently downgraded by both CRT Capital and Barclays in the past few weeks, with average price targets residing around the $46-47 mark (the stock is currently trading right up against those numbers). Billionaire Daniel S. Och of OZ Management has nearly $90mm invested in RLGY.

Expeditors International of Washington, Inc. (NASDAQ: EXPD)
is an $8bn provider of global logistics solutions, providing clients with an extensive network with which to move and position goods. EXPD has a trend of disappointing during earnings, with the most recent let down occurring at the end of last month. The misses are slight and have not deterred Wall Street from loving the stock; Credit Suisse, Avondale Partners, and Edward Jones have all given EXPD bullish ratings since the start of the year. The stock still has 15% of upside to meet average price targets one year out. Billionaire Ken Griffin of Citadel Investment Group owns over a million shares of the stock.

Fleetmatics Group Plc (NYSE: FLTX) provides fleet management solutions to its customers, enabling them to locate vehicles, monitor fuel usage, and track mileage amongst other things. The company is quite small in nature, with a market cap of less than $750mm. FLTX priced its IPO at $17 last October and is currently trading at $23.74, bestowing those who got in with a 40% gain in less than six months. Fleetmatics is off to a strong start as a public company, delivering revenue beats in both quarterly earnings reports thus far. Analyst firms ranging from RBC Capital to BofA/Merrill have all given the stock a ringing endorsement with Buy, Overweight, or Outperform ratings.

Medical device company Cyberonics, Inc. (NASDAQ: CYBX) is also a favorite amongst sell-side research firms, receiving positive mention from Lazard Capital and Sidoti since the start of this year. CYBX surprised analysts last month with an earnings beat that was 23% greater than expectations, continuing the company’s consistently positive announcements. The stock has more than doubled the gain of the S&P 500 looking back a year, even taking into an account a 7.6% drop in January after being accused of encouraging its sales staff to have surgeons prematurely schedule battery replacement surgeries. D. E. Shaw bumped up its position by more than half in Q4 2012.

Our favorite pick in this group is Realogy which has seen extremely high hedge fund interest for a stock this size. We aren’t sure what Facebook can do in the short-term but we think it is more likely to deliver strong capital gains over the long-term. The most interesting stock pick in this group is, though, Fleetmatics. The only other fund with an FLTX position is Driehaus Capital. We would stay away from it.

This article is written by Eric Winter and edited by Meena Krishnamsetty. They don't own shares in any of the stocks mentioned in this article.The Motley Fool recommends Facebook. The Motley Fool owns shares of Expeditors International of Washington and Facebook. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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