I make changes to my portfolio and those of my clients once a quarter, where I trade out of 2-4 of my ~35 companies, and buy a similar number of new companies.  I have detailed that in this article.

But one thing that I do differently now is where I source ideas.  There are three places:

1. Articles I read that seem to have good ideas.  I print them out and put them in a folder.
2. My industry studies.
3. Scanning the 13Fs of ~75 clever investors.  That’s the new part.

I’m not going to write a lot more commentary this evening.  I’m just going to give you a results dump.  I have already gone through my results and made changes to my clients’ portfolios, save for one stock that is a little illiquid, and will take some time to acquire.

As it is, I want to share the following data with you from my trolling through the 13F filings:

Number of investors adding a new stock:

Umm, Groupon, GM?  Interesting.

Number of investors adding to a stock position:

The companies most held by my group of investors:

Number of investors decreasing a stock position:

Number of investors selling a stock entirely:

As a percentage of market cap, new positions added:

Increases in positions as a percentage of market cap:

Decreases in positions as a percentage of market cap:

Largest amount of stocks sold out in entire:

Finally, a list of the largest companies held by my investors where there is still net buying going on:

That’s all for now.  Comments are welcomed below.

Full disclosure: long ORCL, WFC, SPLS, ESV, TEL

After reading Jason Zweig’s good piece, “Should You Bottle Up Your Money in ‘Baby Bonds’?” I said to myself, “But what does the prospectus look like?”  So I went to EDGAR, and pulled up the prospectus for Fifth Street Finance Corp’s 5.875% Senior Notes due 2024.

Please understand — I get squeamish with the unsecured bonds of exotic financial companies.  Losses on the bonds of financial companies when they fail tend to be far worse than those of industrials or utilities.  That is a major reason why financial bonds typically yield more than similarly rated non-financial bonds.  They are more risky.

So, looking through the deal summary terms, we learn:

• At $75 million, the deal is small.
• It’s a 12-year deal — that’s done to confuse buyers, because it gets priced off the 10-year Treasury, giving the illusion of more spread.
• Quarterly pay of interest which raises the effective yield a touch.
• Senior subordinated, but…
• effectively subordinated to all our existing and future secured indebtedness (including indebtedness that is initially unsecured to which we subsequently grant security), to the extent of the value of the assets securing such indebtedness, including without limitation, the $206.3 million of borrowings under our credit facilities outstanding as of October 10, 2012; and
• structurally subordinated to all existing and future indebtedness and other obligations of any of our subsidiaries, including without limitation, the indebtedness of Fifth Street Funding, LLC, Fifth Street Funding II, LLC and our SBIC subsidiaries.
• The bonds are callable at par after 5 years.

The structural protections here are weak.  You are lending to a financial holding company where many of the assets are pledged to other creditors.  More on that in a moment.

The risk factors for a business development company like Fifth Street are significant, and can be found here, all eighteen-plus pages of them.  But the risk factors of the debt are more significant, and can be found here.  Here are the main headings:

• The Notes will be unsecured and therefore will be effectively subordinated to any secured indebtedness we have currently incurred or may incur in the future.
• The Notes will be structurally subordinated to the indebtedness and other liabilities of our subsidiaries.
• The indenture under which the Notes will be issued will contain limited protection for holders of the Notes.
• There is no existing trading market for the Notes and, even if the NYSE approves the listing of the Notes, an active trading market for the Notes may not develop, which could limit your ability to sell the Notes or the market price of the Notes. 
• If we default on our obligations to pay our other indebtedness, we may not be able to make payments on the Notes.

Unsecured holding company debt can be weak, because with some subsidiaries there may be regulatory limits or private limits to upstreaming capital to the holding companies.  That puts financial holding companies in a weak position, because when financial conditions get bad liquidity can get very tight.

And with business development companies [BDCs], which own and finance small-to-medium sized businesses, there is a lot of idiosyncratic risk including:

• Your downside is 100%, but your upside is capped.
• BDCs tend to be speculative investors.
• Many of the assets held are subject to third-party security interests, which lessens the rights of unsecured lenders to the holding company.
• BDCs, life REITs, have to pay out 90%+ of taxable income in order not to face corporate taxation.  That forces BDCs to continually go to the credit markets for financing.  But what if the market is no longer favorable for a year or two?
• BDCs are placid weather vehicles, and more so the bonds.  One might be better off holding 30% Treasuries and 70% BDC stock.  At least you have more downside protection, and more upside.

So put me in the camp of those that have no interest in BDC debt.  It is a weak instrument, and regardless of what the rating agencies say, they are not investment grade risks.

Politics & Policy

• Was the Budget Deficit Worth the Fight? http://t.co/jDn9r7DC Budget deficits are an assault on the quality of our money & savings $$ @carney Nov 24, 2012
• None Dare Call It Default http://t.co/4o0lnQoe A nicer term for what’s about to sock the middle class is ‘entitlement reform.’ $$ Nov 24, 2012
• Judge Pens New Bankruptcy Chapter http://t.co/6V5cUQjS US BK Court Judge Thomas Bennett takes on the Jefferson County, AL Ch 9 filing $$ Nov 24, 2012
• Banks reportedly lining up against Elizabeth Warren committee spot http://t.co/YRAId5TQ & http://t.co/LFXTCZEb I say give her a chance $$ Nov 21, 2012
• Globalism goes backward http://t.co/h6kt67Lz As global growth slows, so does its handmaiden, globalization. $$ Nov 21, 2012
• 2013 Looks a Lot Like 1937 in 4 Fearsome Ways http://t.co/iZjmM1ZA Pre-election spree, post-reduce deficit, class war, prior laws bite $$ Nov 20, 2012
• FHA running out of money http://t.co/L1M7lRIK “We take the findings of the independent actuary very seriously…” loss reserves too low $$ Nov 20, 2012
• Pension cuts could boost state’s Social Security costs http://t.co/61jicHRM If benefits drop below certain level, have 2 pay SS/Med taxes $$ Nov 19, 2012
• Special Dividends Surge Fourfold as US Tax Increase Looms http://t.co/vPVaLNFU Last chance 2 reward shareholders w/low div tax rates $$ Nov 19, 2012
• http://t.co/LJnienxh San Bernardino: How California law, police/firemen, CALPERS, dysfunctional politics, & bad pension acctg rules killed Nov 19, 2012

Monetary Policy

• Soros Buying Gold as Record Prices Seen on Stimulus http://t.co/pJ5FTplo Gold prices react2cost of carry; neg in real terms now $$ #zoom Nov 24, 2012
• Paula Broadwell’s Radar Tracks Generals, Not Fed http://t.co/WglEhJFo Bernanke’s/Yellen’s ideas will crumble from stagflation $$ @cabaum Nov 24, 2012
• Abe threatens to turn BOJ into an unlimited piggy bank for the government http://t.co/LxWwmlyP Eventually the real economy will rebel $$ Nov 21, 2012
• It’s a Good Bet the Fed Doesn’t Know What It’s Doing http://t.co/zG6mepy0 Couldn’t pick a worse Fed 4 crisis: imagines it knows what 2 do $$ Nov 19, 2012

Hewlett-Packard

• Hurdling H-P: Oracle Shows Way in M&A http://t.co/fiJvmT2N Point is $ORCL ‘s older deals have been productive, $HPQ ‘s not. $$ FD:+$ORCL Nov 23, 2012
• H-P’s Deal Process Bypassed CFO Pre-Whitman http://t.co/WfawtYfh Note that Cathie Lesjak opposed the Autonomy purchase. Smart lady $$ Nov 21, 2012
• Goodwill Hunting http://t.co/ghFrEDlY @epicureandealmaker takes down a generally cruddy Bloomberg article on $HPQ & Goodwill accounting $$ Nov 21, 2012
• Note to all writing about Hewlett Packard: the ticker is $HPQ, not $HP, which is Helmerich & Payne, which drills oil and gas wells $$ Nov 20, 2012
• Ironic in many ways. HP should have been happy with their engineer-driven pre-Fiorina culture. It did a lot… http://t.co/rqXEW5Bi Nov 20, 2012

Loose Monetary Policy Harms Fringe Nations

• Debt Burden Adds to Won Gains in Crimping Korea Rebound http://t.co/y6uHfFEw Loose monetary policy creates debt bubble in S. Korea $$ Nov 24, 2012
• S&P: Australia is Spain in waiting http://t.co/usllSlBt Heavily indebted financial systems can be like the snowpack prior 2 an avalanche $$ Nov 21, 2012
• Prison of Debt Paralyzes West http://t.co/ofJXWyLu Government debt after a point does not stimulate, but perpetuates unproductive policy $$ Nov 20, 2012
• Purple Palace Abandoned Shows China Shadow-Banking Risk http://t.co/tmg6jPhy China is like Japan 23 years ago: fearsome & malinvested $$ Nov 20, 2012

Rest of the World

• Egypt Presidential Decree Sparks Protests http://t.co/a5YUcvtN Anyone surprised that the Muslim Brotherhood came out on top? State Dept Nov 23, 2012
• Can Xi Jinping bring about the change China needs? http://t.co/i3XGKZBJ Long article on the new Chinese leader; very tough road to travel $$ Nov 21, 2012
• Pipeline Would Loosen Russian Stranglehold On European Natural Gas Supply http://t.co/3zPUInTZ Where there is a will there is a way $$ Nov 20, 2012
• Misconstruing Germany Will Prove to Be Death of the Euro http://t.co/nCJ7rLiZ Germany won’t want a banking union; their banks have issues Nov 20, 2012
• http://t.co/MSqwtq4u China unlikely to make shift to consumption, b/c it means granting freedom to the people & reducing party cronyism $$ Nov 20, 2012

Personal Finance

• After Sandy damage, insurance adjusters may bring more bad news http://t.co/GTAhE9x3 If odds of getting flooded > 1% get flood insurance $$ Nov 24, 2012
• Tax Moves to Make Now http://t.co/TmoaGOCC Balanced piece; worth a read. Assumes we don’t go over the fiscal cliff: a deal is struck $$ Nov 24, 2012
• Lenders Rev Their Engines http://t.co/5jz3pt3l Surge in Demand for Auto Loans Spurs Push Into Sector; Subprime Is a Big Draw $$ Nov 23, 2012
• For ‘Credit Invisibles,’ A Market Takes Shape http://t.co/4l849dmK A blast from the past; using payment histories 2 establish credit $$ Nov 20, 2012
• apparent mojo http://t.co/lDNmxD1s @researchpuzzler does homework, comes to correct conclusion on a tiny junk fund featured in the WSJ $$ Nov 20, 2012
• Draining Away! http://t.co/hQAqzE9M Universal life policies suffer from low interest rates. B sure 2 check the gteed minimum rate $$ Nov 19, 2012

Miscellaneous

• The Great Thanksgiving Hoax http://t.co/kwbE39ee Strangers were the lazy ones; like the Hutterites the Saints could have made socialism work Nov 21, 2012
• Archbishop Says Church Lost Credibility on Women Bishops http://t.co/n7XkjfDM The “laity” understands the Bible better than the priests $$ Nov 21, 2012
• Why One Poll Says 45% Would Rather Skip Christmas http://t.co/zwwqY00R Costs a lot; nativity means much to Christians, Christmas is made-up Nov 20, 2012
• Windows 8 killed my PC http://t.co/slcTSRVA No operating system should expect 2b equally good touch vs keyboard, tablet vs laptop, etc $$ Nov 20, 2012
• Kill the Password: Y a String of Characters Can’t Protect Us Anymore http://t.co/jPoLzKpK Long but worth it; multifactor ID is the future $$ Nov 20, 2012

Market Dynamics

• Kyle Bass gives it to us with both barrels http://t.co/yZLt36kW Very long. Worth it if you want to see what he is up to in investing. $$ Nov 21, 2012
• Mismeasurement of Pensions Before and After Retirement http://t.co/DwE869Js The full paper, & you don’t have to pay NBER a cent $$ Nov 19, 2012
• In a Slow Market, Wait for Compelling Values Says Johnson http://t.co/lf891lb5 Expects 5%-ish returns 2013; unusual 2 get small returns $$ Nov 19, 2012
• Tech Sets Correction Course http://t.co/ct7yaWcb Largest sector of the market is feeling soggy, which does not bode well 4 the rest $$ Nov 19, 2012
• Why Mutual Fund Guardians Are Failing http://t.co/UMvk4AAB Old/good article on the flaws of mutual fund governance; skewed incentives $$ Nov 19, 2012
• Investment Falls Off a Cliff http://t.co/GVqnEdLH US Companies Cut Spending Plans Amid Fiscal and Economic Uncertainty; unstable policy Nov 19, 2012
• Buy on the rumor, sell on the news $$ RT @BloombergNews: S&P 500 rises most in two months amid budget deal optimism | http://t.co/yyR2uiSi Nov 19, 2012

Other Companies

• I know the basics on a lot of companies but is the first time I have heard of Schiff Nutrition International $SHF http://t.co/jxHIdf1v $$ Nov 21, 2012
• Hostess Judge Sees Return to ‘Liquidation Scenario’ http://t.co/OeDI3sTX Twinkies will survive, but many who produce them will not $$ Nov 21, 2012
• Hostess Seen Attracting Bids for Assets From Flowers http://t.co/vAu1o7Wv The brands will get bought; the value is there, not in plants $$ Nov 19, 2012
• Drillers Begin Reusing ‘Frack Water’ http://t.co/nOiR3sy5 Energy Firms Explore Recycling Options 4 Industry That Uses Water Like Chicago Nov 19, 2012

Wrong

• Bad Headline: Wall St Kept Winning on Mortgages Upending Homeowners http://t.co/fuKDx4ss Most tricky mtges not originated by Wall St $$ Nov 19, 2012
• Wrong: S&P 500 in Cheapest Bull Market Since Ronald Reagan http://t.co/jNJ1x0SU When will they learn *not* 2 use P/E 4 mkt valiuation? $$ Nov 19, 2012

Replies

• @PlanMaestro Thanks — missed that. Nov 23, 2012
• @PlanMaestro I just can’t believe the 1.5 Billion figure for the Earth’s carrying capacity; even the Club of Rome is more optimistic, no? Nov 23, 2012
• “How many lines can be drawn in a 2D plane such that they are equidistant from 3 non-collinear points?” 3… http://t.co/QQkn7IcR Nov 23, 2012
• Grantham is outside of his skill set here, and should be ignored. Also, global population will top out at… http://t.co/ZACbqPQO Nov 23, 2012
• Nothing against Bill McBride. He deserves praise from all of us. There are three missing pieces though, and… http://t.co/Dfs50uGQ Nov 21, 2012
• . @Dvolatility H-P CDS Curve Flattens on Write-Down http://t.co/9vWEDzcZ Early buyers of $HPQ protection made decent money, late less $$ Nov 21, 2012
• @Dvolatility $HPQ CDS spreads did forecast the spread widening, but not the magnitude. It also forecast the stock price move also $$ Nov 21, 2012
• @japhychron @TFMkts @dvandeventer @Dvolatility Or, does the negative tangible book have an impact on modeling? $HPQ $$ Nov 21, 2012
• “You can count beans and trace them back to their sources, good. But can you adequately question the…” $$ David_Merkel http://t.co/JS3Jbtnb Nov 21, 2012
• @dvandeventer @Dvolatility Any read on the level 5Y CDS is trading at? Used to have a BBG terminal, but don’t now… Nov 21, 2012
• @Dvolatility Where does the $HPQ CDS trade now? Nov 21, 2012
• @qusmablog Much of the world has to go through a “failure cycle” before “normal growth” can reboot. Many entrenched interests don’t want it. Nov 21, 2012
• @Nonrelatedsense @researchpuzzler Also not good for the WSJ 2 write about a small fund w/short track record… bigger problem $$ Nov 20, 2012
• @Nonrelatedsense @researchpuzzler Apologies, Chou Income did beat the Barclays Agg since inception http://t.co/VwYvIVYj Carry does it $$ Nov 20, 2012
• @CEOofmyFUTURE longer term measures like the Q-ratio, CAPE10, Price to resources, & Hussman has a measure also Nov 19, 2012
• @BloombergNews Who’s in charge of this page: http://t.co/2sJ5NEDK They changed it last week and made it less useful $$ Nov 19, 2012

Retweets

• Notable & Honorable $$ RT @Nati2de: Larry Hagman was married to the same woman since 1954. Impressive, especially for a Hollywood actor. Nov 24, 2012
• Growth comes when capital, labor & resources have fair prices RT @BloombergView: Greece needs growth, not austerity | http://t.co/f620QBRU Nov 21, 2012
• RT @retheauditors: #1 cause of accounting fraud is revenue recognition issues and #1 industry for accounting fraud is technology/softwar … Nov 20, 2012
• Gracias, no se habla $$ RT @besanson: #FunAndFinance Interest Rate Swaps and LIBOR in 5 minutes // Thanks or RT http://t.co/zu2LP7Nx Nov 20, 2012
• Torture data until it confesses something $$ RT @Alea_: Does “Statistical Significance” Imply “Actually Significant”? http://t.co/BBTfUThF Nov 20, 2012
• RT @finemrespice: The Federal Housing Administration stands against all prior biological evidence that primates are capable of forming m … Nov 19, 2012
• Buy on the rumor, sell on the news $$ RT @BloombergNews: S&P 500 rises most in two months amid budget deal optimism | http://t.co/yyR2uiSi Nov 19, 2012

Blog News

• My week on twitter: 75 retweets received, 4 new listings, 50 new followers, 92 mentions. Via: http://t.co/SPrAWil0 Nov 22, 2012