Here's What This Hefty Gainer Is Buying

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Every quarter, many money managers have to disclose what they've bought and sold, via "13-F" filings. Their latest moves can shine a bright light on smart stock picks.

Today let's look at Kleinheinz Capital Partners, founded in 1996 by John Kleinheinz. Kleinheinz considers himself a contrarian, opportunistic, and value-oriented investor, and is most savvy about the telecom, health care, and energy industries. Kleinheinz has reportedly averaged 22% annual gains since 1996, which is a strong performance.

The company's reportable stock portfolio totaled $1.3 billion in value as of Sept. 30, 2012.

Interesting developments
So what does Kleinheinz's latest quarterly 13-F filing tell us? Here are a few interesting details.

The biggest new holdings are options on AFLAC (NYSE: AFL ) and Monsanto (NYSE: MON ) (puts and calls, respectively). Other new holdings of interest include beleaguered drugstore chain Rite Aid (NYSE: RAD ) . That's a brave buy, because it's long been a hard company to love, sporting only one star out of five in our CAPS community, for example. There are signs of hope for the company, as its losses have been narrowing recently, but still -- it's a risky bet. The company recently reported November same-store sales down 3%.

Among holdings in which Kleinheinz increased its stake were Amarin (NASDAQ: AMRN ) and New Gold (NYSEMKT: NGD ) . Amarin, a late-stage cardiovascular-focused biotech company, has a promising drug to lower triglycerides, and is securing patents to protect it. Some bulls see its newly approved drug, Vascepa, as underappreciated. Others are simply hoping that it might be acquired by a big pharmaceutical company.

New Gold has enjoyed solid revenue growth in recent years, but not so with its earnings. Meanwhile, its cash has been shrinking, its debt and share count creeping up, and its free cash flow negative. Management remains bullish, though, saying in a recent conference call, "We feel fortunate to have a fully funded organic growth pipeline that can see our production more than double in the next four and half years."

Kleinheinz reduced its stake in lots of companies, including TriQuint Semiconductor (NASDAQ: TQNT ) . TriQuint's fans like that it's a supplier to Apple (NASDAQ: AAPL ) , but its recent earnings report was disappointing. Others don't like that so much of the company's business comes from just one customer, and they worry about competition, too, such as from Skyworks Solutions (NASDAQ: SWKS ) . Bolstering the company's performance are its networking and defense operations. Management expects low-double-digit growth in revenue in its next quarter, and the CEO recently bought $100,000 worth of stock.

Finally, Kleinheinz's biggest closed positions were Lukoil (NASDAQOTH: LUKOY ) and Wal-Mart (NYSE: WMT ) . Other closed positions of interest include Level 3 Communications (NYSE: LVLT ) . The company, long burdened with a mountain of debt, is expanding its services around the world, such as by boosting its video broadcasting in Latin America. Many investors are steering clear, though, not liking its falling free cash flow or lack of a dividend. Even analysts are split, with some liking its increased bookings and others seeing it headed downward. One promising development is Level 3's involvement in Google's (NASDAQ: GOOG ) experiment delivering Internet access and TV through a fiber network.

We should never blindly copy any investor's moves, no matter how talented the investor. But it can be useful to keep an eye on what smart folks are doing, and 13-F forms can be great places to find intriguing candidates for our portfolios.