This SEC Filing Is the Best “Free” Investment Research Service You’ll Ever Get

Investing Strategies

Yesterday I mentioned that there are many ways to make money from watching companies’ Form 13F filings, and most people had no idea how to accomplish that mission.

So today I’m going to share a money manager who’s 13F filings are full of proverbial “gold mines” for investors looking to beat the market…

Trader pointing at financial graph on laptop

For those who did not read the last edition of the Hidden Profits Report, 13F filings are reports that money managers of all stripes must file with the SEC quarterly.

Forty-five days after the end of a calendar quarter, mutual funds, hedge funds, endowments, pensions, family offices, and anyone else handling more than $100 million of public money must send in a list of the securities they held as of the quarter’s end.

By comparing this quarter with the last, we can accurately see what leading investors are buying and selling for their clients and funds.

Used correctly, using 13F filings can turn the best and brightest minds of Wall Street and Sand Hill Road into the world’s greatest free research service.

Used incorrectly, it is a source of clickbait that reveals very little information that will help you make money—because the money managers that dominate the headlines are rarely the top performers.

Today I will share a money manager that has consistently outperformed the market. Unless you have been reading my stuff for a long time or are a devoted fan of Ben Graham-style investing with a moderate to severe research obsession, you have never heard of this firm.

Most of you who take the time to read this issue will dismiss my advice and move on. After all, I will not mention artificial intelligence, renewable energy, electric cars, or a magical trading system that can turn $318 into vast millions by the weekend.

Donald Smith and Company was founded, unsurprisingly, by Donald Smith back in 1980. Mr. Smith met Ben Graham while attending law school at UCLA and became an aficionado of Graham’s asset-based investing strategies.

After graduating with an MBA from Harvard, Smith worked at Capital Research for more than a decade, according to the firm’s website. He eventually became the chief investment officer at Home Insurance.

Donald Smith used a deep value approach to investing, based on buying the lowest decile of stocks based on price-to-tangible book value. He eventually opened his own firm, and was one of the few investment managers using this method—and the firm still uses this approach today.

On its website, Donald Smith and Company cites a study it conducted that looked at stock performance from 1951 to 2014 and found that the lowest decile of stocks ranked by price-to-tangible book value outperformed the S&P 500 by a significant margin.

I took the liberty of updating the study using low-price-to-book value stocks and my own preferred credit models. I found that despite the nasty rumors about the death of value investing, the approach has continued to work very well.

If you owned the firm’s top 230 positions for the past five years, your portfolio would have handily outperformed the stock market by more than 50%. Owning the top 30 over the past decade has crushed the market by almost 3x.

Knowing what this firm was buying and selling has been far more profitable than tracking what large firms like Vanguard and Blackrock Inc. (BLK) are buying and selling.

While the media and average alleged value investors follow every move made by Warren Buffet’s Berkshire Hathaway, Donald Smith and Company has crushed Berkshire’s return on its top 30 stock holdings by almost two to one since 2001, and more than 4x over the last five years.

Now the question is, what has the firm been buying recently?

I will quickly cover one stock I find interesting. The rest of the data is easily and readily available at for those who can close your trading app long enough to go look.

As the name implies, Algoma Steel Group Inc. (ASTL) is in the steel business. The company makes hot and cold rolled steel as well as plate steel for a variety of industries, including automobiles, infrastructure, energy, transportation (including railcars), and shipping, as well as defense.

The Canadian company has been in business since 1902. During that time, it has become a major player in the North American Steel Industry, with a total production capacity of 2.8 million metric tons annually.

Algoma’s facilities are centered around the Great Lakes, giving it access to marine shipping ports and the rail networks of both the United States and Canada.

The world is going green and taking the steel industry with it. Algoma is responding by transitioning from traditional blast furnaces to cleaner electric arc furnaces to produce steel. This will help the company eliminate coal as an input to the steel-making process and reduce carbon emissions by as much as 70%.

Algoma went public as part of a special purpose acquisition corporation (SPAC) merger in 2021 and has become a Wall Street orphan since that deal closed. Only two analysts from major firms follow the stock, and they have a buy rating with a price target almost 50% above the current stock price.

Algoma Steel is currently trading at just 71% of its tangible book value. Donald Smith and Company added more than three million shares to its existing position in the stock during the fourth quarter of 2022. It was its largest purchase during the final three months of the year.

Buying stocks at a discount to asset value is one of the cornerstones of my small-cap value and momentum service. I have used price to tangible book value to pick stocks for decades, and it works as well today as when I first learned this method in the 1980s.