Scraping together enough coin to win the annual luncheon auction with Warren Buffet probably lies beyond most investors' means. Last year's winning bidder forked over $1.68 million for the privilege (all of which went to charity).
Still, many investors would love the chance to chow down with Buffett and pick his brain on his investment philosophy and stocks he's considering buying. They'd probably love to do so for many other value investing legends, too.
Feast or famine
Perhaps we can't break bread with the greats, but we can peek at their stock ideas through their SEC filings. Here, we'll pore over the reports of some of the top investors and see which stocks they've chosen as their best investments. We'll then check in with Motley Fool CAPS members to see whether they agree.
Obviously, there are a few caveats to a strategy of piggybacking on the masters:
- There's a delay from when the stocks were bought and when they file their paperwork. If they were a good deal back then, are they still a good deal today? Have they sold out since?
- These legends may be hot investors now, but that can change in an instant. Bill Miller was a wunderkind for beating the market 15 years in a row -- then he went cold for three. He came back in 2009, but we don't know what 2010 will bring.
Contrary to popular opinion
That's why we say you'll need to do further research, but with those points in mind, let's take a look at Mohnish Pabrai, the managing partner of Pabrai Investment Funds, whose funds have about $500 million in assets under management. Pabrai is a well-known value investor in the vein of Warren Buffett and Charlie Munger, looking for special situations and companies that possess "moat-based" competitive advantages. Pabrai, who also once won the Buffett luncheon auction, is the author of two investing books, including the bestseller The Dhando Investor.
Monish Pabrai's investing philosophy can be deceptively simple, and is best represented by the concept of "heads, I win; tails, I don't lose too much." Buffetologists can see the wisdom in that ideal as it's similar to the Oracle staying within his own circle of competence.
"I don't try to jump over 7-foot hurdles: I look for 1-foot hurdles that I can step over."
Fund: Pabrai Investment Funds
No. of Stocks Owned: 16
Top 5 Holdings: PotashCorp
Top Sectors: Basic Materials, Industrials, Consumer Staples
Pabrai maintains a highly focused portfolio, much like Buffett operated when he first began. The three companies below represent completely new additions to Pabrai's portfolio at the time of the filing, and were the largest purchases relative to the size of the portfolio.
|
Stock |
Avg. Price |
Recent Price |
% Chg |
CAPS Rating |
|---|---|---|---|---|
|
CapitalSource |
$3.67 |
$5.44 |
48.4% |
***** |
|
Terex |
$21.85 |
$20.54 |
(6.0%) |
***** |
|
Wells Fargo |
$28.27 |
$28.01 |
(0.9%) |
*** |
Source: SEC filings.
Naturally, we encourage you to look closer at these stocks before you even consider buying. You can get low-priced appliances in the dent-and-ding section of your home-remodeling superstore, but their quality might not be so good. Same thing here: Make sure there's nothing seriously wrong with the company before you plug it into your own portfolio.
Price is what you pay
Last week, we highlighted Steve Mandel at Lone Pine Capital, who also picked Wells Fargo as a bank worth holding. Warren Buffett also recently increased his stake in Wells Fargo. In that light, Pabrai's entrance probably isn't surprising. The relatively little churn in his account also shows a strong influence from Buffett.
Pabrai's purchase of specialized commercial finance outfit CapitalSource is an interesting addition, however. Late last year it announced it was selling virtually all of its long-term care facilities for $860 million to pay down its debt. That should help earnings near-term and solve some liquidity issues.
Investors also remain confident in its ability to persevere, with 96% of the nearly 2,000 CAPS members rating the financing specialist indicating they think it ill outperform the broad market averages. Highly rated CAPS All-Star member jc09058 keeps an eye on CapitalSource's long-term recovery:
Despite the financial meltdown, I feel that this company has managed it's resources fairly well and hopefully, has resolved all issues resulting from the the sub-prime mess. I do expect that any turn around will be long and the share price will take some time to reflect that. A wait and see.
Value is what you get
It pays to start your own research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made, all from a stock's CAPS page.
Sign up today for the completely free service, and tell us whether these stocks are as good a value as these investing legends think they are.
