Fairholme Cuts Stake in Sears Holdings Corp (SHLD), Ubben Sells Even More Shares of Motorola Solutions Inc. (MSI), Plus Two Other Moves

Chief Investment Officer of Cambria Investment Management, Mebane Faber, wrote a book titled “Invest With the House: Hacking the Top Hedge Funds”, revealing a successful approach of how to generate good trading profits that involves mimicking hedge funds’ moves without paying their exorbitant fees. According to Mr. Faber, investors should try to avoid investing in hedge funds’ number one stock picks and focus on constructing an equally-weighted portfolio comprised of the top five holdings of favored investment firms, based on their quarterly 13F filings (excluding the largest equity position of those firms). Mebane Faber back-tested a strategy to the early 2000’s by focusing on his 20 favorite hedge funds and found that the strategy outperformed the S&P 500 gauge by six percentage points annually through the end of 2015. Likewise, our own backtests that covered the period between 1999 and 2012 showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see more details here). These strategies suggest that tracking or examining the moves undertaken by top money managers in the hedge fund industry can pay off handsomely for retail investors. For that reason, this article will digest four SEC filings submitted by renowned investment firms monitored by Insider Monkey.

According to a freshly-amended 13D filing, Bruce Berkowitz’s Fairholme Capital Management LLC currently owns 26.71 million shares of Sears Holdings Corp (NASDAQ:SHLD), which account for 25.0% of the company’s outstanding common stock. This is down from the stake of 28.10 million shares reported in the mutual fund’s previous 13D on the company, which was filed with the SEC in late February. According to the aforementioned filings, Mr. Berkowitz accepted an invitation from the integrated retailer to join its Board of Directors effective February 24. Sears Holdings Corp (NASDAQ:SHLD) operates a national network of stores that comprises 1,672 full-line and specialty retail stores under the Kmart and Sears brand names. The struggling retailer has seen its annual revenue figures decline on a yearly basis since 2007. The company generated merchandise sales and services of $25.15 billion during 2015, down from $31.20 billion in 2014 and $36.19 billion in 2013. Shares of Sears are down by 64% over the past 12 months and it is not entirely clear how much more shareholder value could be destroyed by the sinking retailer in the years ahead. There were 2o hedge funds in our system with stakes in Sears Holdings at the end of 2015, compared with 22 registered at the end of the third quarter. Those 20 funds accumulated roughly 67% of the company’s outstanding shares. ESL Investments, managed by Edward Lampert, who now also manages Sears, owns 22.34 million shares of Sears Holdings Corp (NASDAQ:SHLD) as of December 31.

In a newly-amended Form 4 filing, Jeffrey Ubben’s ValueAct Capital reported selling 304,000 shares of Motorola Solutions Inc. (NYSE:MSI) on Monday at $72.82 apiece, trimming its holding to 8.21 million shares. The freshly-cut stake accounts for 4.71% of the company’s outstanding shares. The friendly activist hedge fund has been gradually unloading its stake in Motorola Solutions, as revealed in numerous Form 4 and 13D filings discussed by Insider Monkey recently; the fund had 17.59 million shares in its portfolio at the end of 2015. On March 10, ValueAct Capital entered into a pre-arranged 10b-5 Plan, under which the fund was set to sell up to 2 million shares through May 2016. However, given that Mr. Ubben’s investment firm owned 10.21 million shares of Motorola Solutions on March 10, the sales plan is currently completed (ValueAct sold exactly 2.00 million shares from March 11 through March 21).

The provider of mission-critical communication infrastructure, devices, software and services to government, public safety and commercial customers has seen its shares advance by 12% in the past 52 weeks. Motorola Solutions Inc. (NYSE:MSI)’s net sales for 2015 totaled $5.7 billion, a decrease from $5.9 billion generated in 2014. The decrease was mainly attributable to foreign currency headwinds in Europe and Africa, Asia Pacific, and Latin America, which was partly offset by growth in North America. It is important to note that the company plans to reduce its organic SG&A and R&D expenses by $150 million in 2016, which may drive up bottom-line results in the quarters ahead. The smart money sentiment towards Motorola Solutions declined in the December quarter, with the number of funds invested in the company shrinking to 22 from 27 quarter-over-quarter. William B. Gray’s Orbis Investment Management reported owning 13.05 million shares of Motorola Solutions Inc. (NYSE:MSI) through the latest round of quarterly 13F filings.

The next page of this article discusses two other SEC filings submitted by firms tracked by Insider Monkey.