Billion-dollar fund manager David Dreman has been investing institutional money on Wall Street since 1977 within his fund, Dreman Value Management. The investment firm, which heavily favors financial stocks, recently released its Q4 13F filing with the SEC, detailing which positions it held going into the end of last year. We keep a close eye on how the Street’s giants invest their money, as we’ve found a number of retail-friendly strategies can be gleaned from them, including a proprietary small-cap strategy that has returned over 29% since it was launched last September (find out more here). We’ve dug into Dreman’s latest public disclosure and have analyzed his largest purchases made in Q4 2012.
First Niagara Financial Group Inc. (NASDAQ:FNFG) was Dreman’s largest new initiation, receiving an allotment of $24mm from the firm. True to his portfolio’s strong tilt towards financials, the retail and commercial banking company takes up 0.70% of the fund’s AUM. Goldman Sachs initiated coverage on FNFG last December, sticking it with a Neutral rating. Despite a 10% price depreciation stretching back a year, growth could be in First Niagara Financial Group Inc. (NASDAQ:FNFG)’s future with its purchase of 195 banks from HSBC last year. The $4.15 dividend yield should help to tide investors over in the meantime. Billionaire Ken Griffin of Citadel Investment Group has a share count that nearly tops 5mm (see his other holdings here).
Berry Petroleum Company (NYSE:BRY) was a $17mm investment by Dreman Value Management. Continuing the trend that is prevalent through most of this list, BRY also gave a negative performance in the past twelve months, losing 8% versus the market’s gain of 13%. However, the independent energy company is up 40% year-to-date after last month’s announcement of being acquired by Linn Energy (NASDAQ:LINE) for $2.5bn. Berry Petroleum Company (NYSE:BRY)’s consistent earnings misses did not deter Linn, who is after Berry’s “long lived, shallow decline assets.” Israel Englander of Millennium Management might be a tad more satisfied now with the $8mm purchase in BRY he made last quarter (take a look at his portfolio’s make-up here).
Mentor Graphics Corp (NASDAQ:MENT) received a dedication of $16mm by Dreman in the fourth quarter. Unlike the rest of the stocks on our list, Mentor’s price per share went up since this time last year, even slightly beating the market’s return. The company supplies electronic design automation tools and has performed well relative to analysts’ expectations each earnings season; this includes a string of double-digit beats in 2012. MENT recently initiated a modest dividend of $0.045/share, resulting in an annual yield slightly north of 1%. The stock is almost 20% away from where Wall Street expects it to be a year from now. Billionaire Carl Icahn of Icahn Capital LP has an incredible $274mm invested (read about his top picks here).
Which other stocks made it into Dreman’s portfolio?
Itron, Inc. (NASDAQ:ITRI) saw a slight bump in popularity amongst hedge funds going into the end of last year. Of the 400+ funds we track, 15 owned the stock in Q4 2012 versus 12 in Q3. The $1.7bn company develops technology for water, electric, and gas metering applications and keeps global operations. Dreman allocated $14mm to the company, joining billionaire Glenn Russell Dubin of Highbridge Capital Management, who also initiated a position in ITRI last quarter (check out his portfolio positions here). Boosting shareholder value, Itron announced earlier this month that it will launch a $50mm stock buyback program that could potentially repurchase almost 3% of outstanding shares.
Kulicke and Soffa Industries Inc. (NASDAQ:KLIC) received a $7.6mm capital commitment from the hedge fund and was the smallest company that made it onto our list; its market cap is measured in millions, not billions ($875mm to be exact). The company makes tools and equipment used in the manufacturer of semiconductor devices. Despite KLIC’s small size, its balance sheet is a financier’s dream with almost $500mm in cash and zero debt. That cash stockpile might lead to a possible buyback or dividend redistribution for stockholders in the future, but no concrete announcement has been made yet. D. E. Shaw reduced its position in half going from Q3 2012 to Q4 (view the fund’s full holdings here).
Disclosure: I do not own shares of any stocks mentioned in this article.
