David Dreman, founder and chairman of Dreman Value Management, shares his opinions about investments with the public; that’s why we like him. He has published many scholarly articles and he has written four books, most of which discussed contrarian investment strategies. Dreman also writes a column for Forbes Magazine and is the co-editor of Journal of Psychology and Financial Markets. In addition, he is on the board of directors of the Institute of Behavioral Finance, which publishes Journal of Behavioral Finance. Dreman currently has approximately $5 billion under management. He was managing about $22 billion in 2007 and was hit hard by the financial crisis in 2008.
Dreman’s 13F portfolio had $5.2 billion portfolio under management at the end of June and now its portfolio value is about $4 billion. Though the value of the portfolio is lower, the number of positions increased. The fund had 278 positions at the end of the third quarter. Dreman sold out a few positions over the third quarter. For example, the fund disclosed to own $19.0 million worth of Central European Distribution Corp (CEDC) at the end of June, and it did not report to own any shares of the stock at the end of the third quarter. Since the end of September, the stock lost 45.51%, almost half of its value. Dreman also sold out Cal Dive International Inc (DVR), Aarons Inc (AAN), and Scotts Miracle Group Co (SMG). Most of these positions underperformed SPY, which returned 7.92% since the end of the third quarter.
Dreman significantly increased his stakes in Duke Realty Corp (DRE) by 766% over the third quarter. Now his fund owned $31 million worth of the stock. DRE returned 8.12% since the end of September, slightly beating the market. Dreman also increased his position in Staples Inc (SPLS) by 10% to $21.4 million and his position in Jakks Pacific Inc (JAKK) by 7% to $34.4 million. SPLS returned 5.86% and JAKK returned 1.53% since the end of the third quarter.
Dreman initiated a brand new $29.5 million position in SPX Corp (SPW). SPW returned 29.71% since the end of September, beating the SPY by almost 22 percentage points. Dreman is also bullish about Energen Corp (EGN) and Cabot Corp (CBT). His fund initiated a brand new $21.3 million EGN and $18.0 million CBT over the third quarter. These two positions generated a weighted average return of 23.9% since the end of the third quarter, outperforming the market by 16%. Israel Englander’s Millennium Management also had approximately $50 million invested in EGN. Dreman also opened new positions in Olin Corp (OLN), Harsco Corp (HSC) and Huntsman Corp (HUN). John Burbank's Passport Capital had an $18 million position in HUN at the end of September.
As we mentioned, we like Dreman, as he does not keep his views secret but devotes himself in educating ordinary investors. Over the third quarter, his Dreman Value Management made a few smart moves, like selling CEDC and purchasing SPW. We encourage investors to focus on Dreman’s best stock picks and we believe that by doing so, investors will be able to beat the market in the long term.