A $140 Billion Financial Powerhouse Owns these 2 Emerging-Market Stocks. Should You?
My favorite stock screening method is to see what the big money owns, and then dig deeper from there. The concept behind this starting point is that the large hedge-fund and money-management firms have far greater collection of resources, computer power and talent than I, as an individual investor, could ever hope to yield.
By following the big money via their 13F filings, it's possible to discover profitable stocks, investing themes and other tricks of the trade. Because of their size, large funds are often forced to hold positions in stocks for the longer term.
Therein lays the advantage the individual investor has over the 13F filing behemoths. Individuals can observe what the big guys have done, watch the performance of their investments, then decide which one of the pre-screened names makes sense to buy. This knowledge combined with the small-scale flexibility in trading provides the individual investor an edge over the big guys. (And who knows? You might even get it for a better price than they did, too.)
This is how I discovered an intriguing pattern with one of the largest money-management firms in the world, Lazard Asset Management.
Lazard was founded in 1848, and manages a monster-sized stock and bond portfolio of $41 billion. Clearly, decision makers at this level are in the price-driving, market-moving category, and are thus worth studying.
The interesting pattern with Lazard's stock investments is that out of its 15 largest holdings, five are American depositary receipts (ADRs). ADRs are securities of non-U.S. companies that trade in U.S. markets. In other words, you can buy shares of these international companies on the New York Stock Exchange just like you can a domestic company.
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While this peaked my interest, the fact that four of the five ADRs Lazard owns are in the telecommunication business in Russia, China, Philippines and Latin America, forced a very important question: Do telecommunication ADRs make sense as investments right now?
Not only do I like the fact that Lazard is heavily invested in telecom ADRs, but the fact that ADR telecom stocks dominate the list of the top international dividend-paying companies is a compelling reason to invest.
Let's briefly drill down into their two largest telecommunication holdings and look at their stock fundamentals...
1. Philippine Long Distance Telephone Co. (NYSE: PHI)
This Philippine telecom service company has a market cap of $12.62 billion and is Lazard's largest telecom holding. An operating margin of 32.2%, a 9.4% return on assets, and second-quarter revenue that expanded by 13.8% in comparison with the year-ago period indicate that the company is efficient and growing. But also in the second quarter, net income declined by 6.1% year-over-year, possibly throwing up a red flag on the otherwise solid fundamental picture.