Playing Follow the Leader With MOT

One of the hardest parts of being a value-oriented special-situations investor is finding ideas worth investing in. There are lots of methods for searching the ever-widening universe of stocks that fit your criteria, but all too often, we overlook the easiest method available.

For finding quality ideas that have already been vetted by smart experienced investors, nothing beats good old theft. Securities laws in the United States require that most institutional investors release their holdings on at least a semiannual basis and file a special form any time they acquire more than 5% of any company's outstanding shares. This allows us to gain insight into the holdings of some of the greatest investors out there.

I like to use this information as a kind of all-star research department and regularly read the filings of such luminaries as Robert Rodriguez, Marty Whitman and Mason Hawkins, among others.

A real bonus for those managers who run mutual funds is the shareholder letter where they share their thinking on current markets and the reasoning behind some of their portfolio moves and individual holdings.

One of the richest sources of ideas is filings by the activist investing community. Activists take large positions in companies they think are undervalued and then pressure management to make moves to unlock the value of its shares. Frequently, they are successful, and the shares appreciate as a result of their efforts. Fortunately for us as investors, it is usually a lengthy process and gives us mere mortals a chance to buy shares and reap the benefits of the activist's efforts. One of the more noteworthy and successful activists had an interesting filing this past week.

Taking a Look at Motorola

Carl Icahn announced that he was continuing his fight to unlock the value of Motorola (MOT - commentary - Cramer's Take) shares. Icahn raised his stake to 6.35% of the company's and nominated four directors to its board. Last year he tried to win board seats and fell short, but he has never been one to walk away easily.

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At the time of publication, Melvin had no positions in the stocks mentioned, although positions may change at any time.

Tim Melvin is a writer from Stevensville, Maryland, who spent 20 years a stockbroker, the last 15 as a Vice President of Investments with a regional firm in the Mid Atlantic area. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Melvin appreciates your feedback; click here to send him an email.