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What do the top hedge fund and mutual fund gurus like in the industrial metals processing and goods manufacturing industry? This article, the 31st in a series, identifies through a research of the latest available institutional 13-F filings the gurus that are most invested in the industrial metals processing and goods manufacturing industry, and the specific stocks within that Industry that they prefer to hold in their portfolios. Please note that this group includes industrial metals processing, iron and steel and aluminum manufacturing, paper and containerboard manufacturing, and industrial textile manufacturing companies.
Also, please note that this article will be among the last in this series, as the latest March 2011 quarter 13-F institutional filings are now beginning to come out. About 40% were out as of this weekend, and most should be filed by the end of this week. As such, once 13-F filings are complete for all guru funds, in the next series starting the end of this week to the beginning of next week, I will bring to you the top new and added picks of guru funds by industry/sector detailing this time not the top holdings, but more importantly what new positions they took and what existing positions they added to in the latest (March 2011) quarter. Please check my article page for previous articles in this series, and for definitions of "guru" and other jargon.
The total capitalization of the US equity markets is somewhere in the $15 trillion range, and the total market capitalization of industrial metals and goods manufacturing companies is $350 billion or 2.3% of the overall market. The table lists the top four investment gurus whose funds have invested at least one-and-a-half times that average or 3.4% in the industry (as defined before). The following is a list of the top sector picks of guru funds over-concentrated in that sector:
  • Steel manufacturing companies Metals USA Holdings Corp. (MUSA), a manufacturer of processed carbon steel, stainless steel and aluminum to machinery, construction, energy and other industries; POSCO (PKX), a South Korean manufacturer of steel products for the manufacturing, ship-building, automobile and construction markets; Worthington Industries (WOR), a processor of diversified metals focusing on value-added steel for automotive, construction, hardware and aerospace markets.
  • Schnitzer Steel Industries (SCHN), a manufacturer of finished steel products from recycled metals and recycled ferrous and non-ferrous metal and auto parts.
  • Aluminum manufacturing companies Noranda Aluminum Holding (NOR), a manufacturer of value-added primarily aluminum products and high quality rolled aluminum coils; and Kaiser Aluminum Corp. (KALU), a manufacturer of fabricated aluminum products for aerospace, engineering, automotive, and custom industrial applications.
  • Reliance Steel & Aluminum (RS), a processor of carbon and aluminum and stainless steel products for construction, transportation, aerospace and semiconductor markets.
  • Valmont Industries Inc. (VMI), a manufacturer of fabricated metal products and metal and concrete pole and tower structures for electrical transmission.
  • Graftech International Ltd Holding (GTI), a manufacturer of carbon and graphite products for the metal production, electronics, aerospace and transportation industries.
  • Castle AM & Co (CAS), which is a distributor of specialty metals and plastics for the aerospace, defense, oil and gas, mining, and heavy earth moving industries.
  • Insteel Industries Inc. (IIIN), a manufacturer of steel wire reinforcements and pre-stressed concrete strands for the concrete construction industry.
  • Foster LB Company (FSTR), a manufacturer of track-works, steel sheet pilings and pipe coatings for rail, construction, energy and utility industries.
  • Paper manufacturing companies Verso Paper Corp. (VRS), a manufacturer of coated freshet and coated ground-wood paper used in catalogs, magazines and commercial printing applications; and Clearwater Paper Corp. (CLW), a manufacturer of bleached paperboard, consumer tissue and lumber products.
Table
Fund and Guru
Type of Fund
Assets Under Management
Percent Equity Portfolio invested in Equities of Industrial Metals Processing and Goods Manufacturing Companies
Major Industrial Metals Processing and Good Manufacturing company positions in Portfolio
Apollo Management, LP (Leon Black)
Private Equity – including Hedge Fund
$ 37 billion including $10.8 billion in US Equities
9.2%
NOR, MUSA, VRS
Third Avenue Management LLC (Martin Whitman)
Mutual Funds and Hedge Funds
$ 5.6 billion
9.0%
PKX, KALU, IIIN
Pabrai Investment Funds (Pabrai Mohnish)
Hedge Fund - Value-driven
$ 340 million
6.9%
PKX
Royce & Associates (Chuck Royce)
Mutual Fund
$ 36.3 billion
5.2%
GTI, RS, SCHN, VMI, CLW, FSTR, WOR, CAS
Apollo Management, LP, founded in 1990 by Leon Black, is a private equity firm with over $37 billion of investor commitments across its private equity funds and other investment vehicles, making it one of the largest private equity firms globally. Apollo operates two business lines in an integrated manner: Private Equity which is the cornerstone of its investment activities, and Capital Markets, where it invests through a variety of investment vehicles including mezzanine funds, hedge funds, and senior credit opportunity funds. Apollo specializes in distressed assets, dealing mainly with troubled companies, junk bonds and real estate. As of the latest available December 2010 quarter filing, it had invested $10.8 billion in U.S. equities, with the amount concentrated in only 20 equities. Also, more than 90 percent of its holdings were in companies where it held at least 29 percent of the outstanding shares, including holding 64% of NOR shares outstanding, 64% of MUSA shares outstanding, and 61% of VRS shares outstanding.
Third Avenue Management, founded by legendary investor Martin Whitman, manages mutual funds, separately managed accounts and hedge funds. It's a balance sheet investor that seeks to invest in safe companies that are cheaply priced.
Pabrai runs a $340 million hedge fund. He is a value investor, investing primarily in out-of-favor smaller companies with a market capitalization of less than half a billion dollars. His portfolio is generally concentrated with less than 10-20 companies (for more detail of Pabrai's fund and his holdings and new picks, please see my previous article on May 5).
Royce and Associates, headed by Chuck Royce, is a $36.3 billion mutual fund company with a focus on investing in small cap equities, but also including micro-cap and mid-cap companies. It runs both diversified and limited portfolios based upon its view of the attendant risks within each portfolio's investment universe and approach. Its investment approach is fundamental and bottom-up aimed at individual stock selection based on strong balance sheets, high internal rates of return and ability to generate free cash flow.
Credit: Historical fundamentals including operating metrics and stock ownership information were derived using I-Metrix by Edgar Online, Zacks Investment Research, DailyGraphs, Thomson Reuters and Briefing.com. Fund data including assets under management and firm profiles are sourced mostly from Hedgetracker.com. The information and data is believed to be accurate, but no guarantees or representations are made.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Source: Top Industrial Metals & Goods Manufacturing Picks by Fund Gurus Concentrated in the Sector