Aletheia Research and Management's Favorite Stock Picks

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Includes: ABX, CAT, CNQ, DE, IBM, KO, MCD, NEM, SPY, WMT, XOM
by: Insider Monkey

Peter J. Eichler is the founder of Aletheia Research and Management, Inc, which reported $6.2 billion total assets in its last 13F filing. Eichler graduated from Santa Clara University with a B.A. degree in History. Prior to forming Aletheia Research and Management in 1997, Eichler worked at Bear Stearns & Co for 12 years.

Aletheia currently offers 8 Separately Managed Account strategies to institutional and high net worth clients. These strategies are Aletheia Growth, Aletheia Value, Aletheia International Growth, Aletheia 100 Insider, Aletheia Intermediate Cash Management, Aletheia Income, Aletheia Balanced and Aletheia International Income.

Aletheia Research & Mgmt US Equity Lg Cap Growth Annualized Returns

Table Date: 31 March 2009

Aletheia

S&P500

One Year Return

-42.9%

-38.2%

Three Year Return

-11.98%

-13.4%

Five Year Return

2.98%

-5.0%

Seven Year Return

6.17%

-3.3%

Click to enlarge

In the first quarter of 2011, Eichler sold out 18 securities and bought 13 new securities. During that quarter, Eichler sold out 2.5 million shares of Novellus Systems (NASDAQ:NVLS), 2.1 million shares of Nalco Holding Company (NYSE:NLC) and 2.4 million shares of Babcock & Wilcox (BWC). He also reduced his Exxon Mobil Corp (NYSE:XOM) position to $245 million by selling 261,540 shares during the first quarter of 2011. In the same quarter Eichler placed new bets on DIRECTV (DTV) by buying 1.85 million shares. He also purchased 2.2 million shares of Archer Daniels Midland (NYSE:ADM) and 2.5 million shares of Human Genome Sciences (HGSI) during the first quarter of 2011.

In mid December, Aletheia had 7.67 Million BKS shares in its portfolio. In April the firm sold nearly 1.3 Million shares at around $10.50, reducing its holdings to 6.38 Million shares. Currently BKS trades at $13. Aletheia had more than $100 Million in BKS at the end of December. Israel Englander’s Millennium had $2.3 Million and Richard Schimel’s Diamondback Capital had $1.9 Million in BKS.

Here is how Eichler's largest picks performed since the end of March 2011:

Stock

Value (Millions)

Return
Since Mar 31,2011

EXXON MOBIL CORP (XOM)

245.0

-3.0%

INTL BUSINESS MACHINES (NYSE:IBM)

244.6

1.7%

NOVAGOLD (NYSEMKT:NG)

228.5

-13.9%

CONTINENTAL RESOURCES (NYSE:CLR)

225.1

-13.0%

COCA-COLA (NYSE:KO)

219.3

-1.2%

CANADIAN NATURAL RES LTD (NYSE:CNQ)

204.1

-15.8%

NEWMONT MINING CORP (NYSE:NEM)

202.9

0.3%

EBAY INC (NASDAQ:EBAY)

192.8

-2.4%

BARRICK GOLD CORP (NYSE:ABX)

178.4

-11.5%

ISHARES SILVER TRUST ISHARES (NYSEARCA:SLV)

170.1

-3.9%

MCDONALDS CORP (NYSE:MCD)

159.3

6.6%

CATERPILLAR INC (NYSE:CAT)

145.4

-8.8%

WAL-MART STORES INC (NYSE:WMT)

143.5

3.7%

DEERE CO (NYSE:DE)

141.9

-15.2%

COEUR D ALENE MINES CORP IDAH (NYSE:CDE)

134.6

-27.2%

SUNCOR ENERGY INC (NYSE:SU)

130.9

-9.6%

LAS VEGAS SANDS CORP (NYSE:LVS)

127.8

-0.3%

BOEING COMPANY (NYSE:BA)

124.6

1.8%

HESS CORP (NYSE:HES)

122.1

-9.7%

MOSAIC CO (NYSE:MOS)

121.1

-12.3%

NOBLE ENERGY INC (NYSE:NBL)

108.9

-7.1%

SPDR GOLD TRUST (NYSEARCA:GLD)

106.0

7.4%

INTEL CORP (NASDAQ:INTC)

103.4

8.5%

SILVER WHEATON CORP (NYSE:SLW)

101.7

-18.9%

FREEPORT MCMORAN CPR & GLD (NYSE:FCX)

97.7

-9.7%

ATP OIL & GAS CORP (ATPG)

94.6

-3.0%

AOL Inc (NYSE:AOL)

93.1

7.2%

DOLE FOOD COMPANY INC (NYSE:DOLE)

89.5

-3.2%

DIRECTV (DTV)

86.6

4.5%

MGM MIRAGE (NYSE:MGM)

84.8

7.9%

Value Weighted Return of Top Holdings

4,428

-5.2%

SPY

N/A

-1.6%

Click to enlarge

Eichler's largest holdings have lost 5.2% since the end of first quarter 2011, vs. a 1.6% lost for the SPY. XOM was Eichler's biggest investment at the end of March 2011. XOM has lost 3.0% since then, underperforming the SPY’s -1.6% return. XOM is one of the top 11 energy stocks that hedge funds are buying like crazy. Sixteen hedge funds had XOM among their top 10 holdings. Hedge funds collectively own 1% of XOM’s outstanding shares. The stock gained 14.2% so far this year. Phill Gross’ Adage and Ken Fisher were among the fund managers who are bullish about XOM.

IBM was Eichler's second biggest investment at the end of March 2011. IBM has gained 1.7% since then, outperforming the SPY’s -1.6% return. Eichler has $245 million invested in IBM. Paul Ruddockand's Lansdowne Partners and John Burbank's Passport Capital also had huge positions in IBM at the end of March. IBM recently traded at $165 and has a 1.80% dividend yield. The stock has a market cap of $200 billion and P/E ratio of 13.9.

Novagold (NG) has lost 13.9% since March, underperforming the SPY by 12.3 percentage points. Eichler had nearly $229 million (which is equal to 8.8% of the total market cap) invested at the end of March. John Griffin's Blue Ridge added $55 Million of Novagold Resources (NG) shares to its portfolio during last quarter of 2010. John Paulson also had $262 Million in NG at the end of March. George Soros cut down his NG investment by about $122 Million during the first quarter of 2011.

Eıchler’s short term poor performance is a result of his concentrated bets in commodities and precious metals. Time will tell about the accuracy of these bets. We think it’s more appropriate to check out Eichler's 10 largest long term positions to understand more about his performance. Here are the results:

Long Term Holdings

Stock

Value (Millions)

Return
Since Jun 08,2008

EXXON MOBIL CORP (XOM)

245.0

1.7%

INTL BUSINESS MACHINES (IBM)

244.6

36.9%

COCA-COLA (KO)

219.3

27.0%

CANADIAN NATURAL RES LTD (CNQ)

204.1

-11.0%

NEWMONT MINING CORP (NEM)

202.9

19.9%

BARRICK GOLD CORP (ABX)

178.4

21.5%

MCDONALDS CORP (MCD)

159.3

54.1%

CATERPILLAR INC DEL (CAT)

145.4

34.6%

WAL-MART STORES INC (WMT)

143.5

-0.6%

DEERE CO (DE)

141.9

8.6%

Average Cumulative Return of Long Term Holdings

1,884

19.0%

SPY

N/A

0.5%

Click to enlarge

The above table shows the performance of Eichler's top 10 long-term stocks in the last three years. One of the Eichler's largest investments over the last three years is IBM. IBM returned almost 36.9% since June 2008, beating the market by a large margin. Had Eichler added equal dollar amounts of each stock into his portfolio, his return would has been 19.0%. Considering SPY’s 0.5% return, Eichler's long term picks are extremely successful. This underlines Eichler's talent in picking long term winners.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.