By Eric Winter
Sprott Asset Management's most recent 13F filed at the end of last month revealed some new discoveries in the fund's latest happenings, including a $200mm drop in market value and an uncovering of sixteen new purchases. Manager Eric Sprott is known for his heavy slant towards commodities and precious metals; were his newest initiated positions reflective of that? We have determined which of the sixteen are the largest and have outlined the top five below (compare them to his previous holdings of Q3 2012 here).
Sprott's most prevalent new position came in the form of call options on networking and communications giant Cisco Systems, Inc. (CSCO). His fund echoes the sentiment of many analysts on the Street who emphatically see CSCO as a buy and are expecting at least 4% of growth from current levels, according to an average of their future price estimates a year out. CSCO beat earnings four times in a row last year, contributing to positive growth in revenue for Q3 2012 versus the same quarter in 2011. Unfortunately, with his option position, Sprott will not be able to take advantage of CSCO's high dividend of 2.7%. Jean-Marie Eveillard of First Eagle Investment Management has the highest number of shares out of the 400+ funds we track.
True to his style, Sprott sought a new investment in precious metals producers Primero Mining Corp. (PPP). The stock, totaling 1.21% of his total portfolio, concentrates its gold and silver operations in Mexico through various mines. PPP has been on a tear in the last twelve months, generating 118% returns with most of the gains occurring after June 2012. We see a good amount of speculation in PPP that accounts for future successes; a rising P/E ratio and negative quarterly revenue and earnings growth relative to the same period last year do not show adequate fundamental grounding. Billionaire Steve Cohen of SAC Capital Advisors has been building his own position as well (see his top holdings here).
General Motors Company (GM) was another addition of Sprott's, once again in the form of a call option. The automobile manufacturer made it out of 2012 with roughly the same performance as the S&P 500, assisted by the buyback of its Indian operations in 2012 as well as through the maintenance of a strong truck line. The company started 2013 by announcing a $1.5bn investment in its North American operation (which stands as part of an even larger $8bn global investment plan for the year). We join the majority sentiment by being bullish on the auto manufacturer as auto sales continue to indicate strong recovery in the sector. Warren Buffett recently pushed up his own position by 50% (check out Berkshire Hathaway's other plays here).
As a significant departure from his precious metals investing, Sprott employed 0.8% of his fund in purse and accessories maker Coach, Inc. (COH). The stock saw a significant loss in value in the last twelve months, experiencing a one-third drop in price per share. Opting to once again go with an options position versus straight equity, Sprott might be hoping that the brand's popularity won't shift with the usual tides of fashion and will hopefully recover in 2013. A declining P/E from last year to the upcoming year could signify such positive growth. Christopher Medlock James of Partner Fund Management has pushed COH into his top three holdings with nearly 10% of his assets invested.
Finally, another automaker, Ford Motor Company (F), was added to Sprott's portfolio, once again in the form of a call. Benefiting from the same rise in auto sales as GM, Ford saw a 3% gain in 2012, including a near-20% run-up from summer lows. Unfortunately, increased competition from Asian and European brands has etched away at Ford's market share. Their ability to bounce back and really conquer union woes will spell out whether Ford can reach the optimistic price targets set by research firms. Joining Sprott in his call position is Kevin Ulrich of Anchorage Advisors.