Neuberger Berman And SAC Capital Show Uncanny Prescience

Or do they?

Following Warren Buffett’s March 14 lunge for Lubrizol Corp, it seemed a fun exercise to go back and review  the 13(f) holdings of the chemicals company investors in the runup to the deal announcement.

Here is what a quick look at those holdings between 3rd quarter 2010 and 4th quarter 2010 reveals.

Neuberger Berman raised their Lubrizol holdings by 4,800 per cent for the period, going from 32,000 shares to 1,554,000 shares. SAC Capital upped its holdings by about 690 per cent, from 9,500 to 66,000.

Of course, SAC Capital has about 1,800 stock holdings and among them there are a few much bigger movers such as American Capital (up 11,000 per cent), CA technologies (155,000 per cent), Gap (22,000 per cent), General Mills (78,000 per cent), Direct TV (22,000 per cent), Johnson & Johnson (27,000 per cent) Huntsman Corp (whopping 302,000 per cent), Merck (27,000 per cent) and several others. So, in Cohen’s case the prescience thesis may be somewhat of a stretch.

Things are a bit different for Neuberger’s portfolio of some 1,450 stocks, however. Outside of Blackrock and Discovery Communications, both of which shot up by more than 20,000 per cent, Hospira (up 33,000 per cent) and a couple of others, nothing came close to the Lubrizol percentages. Here, Neuberger may have out-Buffetted Buffett himself in knowing how to pick’em.

Assuming the hedge funds didn’t shed Lubrizol stock between January and now, this whole thing means dollars, and lots of them.  Lubrizol was trading at lows of around $104 and highs at $110 in the past 6 months. It hit $134.25 on Monday when Buffett announced the deal and it’s still up there at this writing.

There is a bit of a cloud over all this, alas. Suspicions of inside trading have been reported in the call options market for Lubrizol. With the SEC’s intense recent scrutiny of insider trading, some of these calls, whether they be luck, prescience or homework well done, might well raise a regulatory eyebrow or two.

It would be interesting to see if these funds still hold Lubrizol at this quarter’s end. That, unfortunately, won’t be revealed until the first half of May when most hedge funds file their quarterly stock holdings with the SEC.

This post originally appeared at Who’s In My Fund? blog.

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