Stocks the Investing Superstars Are Buying

Scraping together enough coin to win the annual luncheon auction with Warren Buffett is probably beyond the means of most investors. With the proceeds going to benefit charity, last year's winning bidder forked over $1.68 million for the privilege.

Feast or famine
So maybe we can't afford to break bread with the greats, but we can peek at their stock ideas through their SEC filings. What we'll do here is 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 if they agree.

First, a few caveats ...

  • There's a delay from when the stocks were bought and when these investors file their paperwork so they might have sold out since.
  • And 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
So do further research, but in the meantime let's take a look at Eddie Lampert at ESL Investments, a Buffett wannabe and perhaps best known these days for his chairmanship at Sears Holdings (Nasdaq: SHLD  ) .

Fund: ESL Investments
No. of Stocks Owned: 11
Top 5 Holdings: Sears Holdings, AutoZone, AutoNation, Capital One Financial, CIT Group (NYSE: CIT  )
Top Sectors: Consumer Services, Financials

Like many of the investing legends we've looked at, Lampert's portfolio is highly concentrated. Let's take a closer look at some of the holdings to see what CAPS members have to say.

Stock

Avg. Price

Current Price

% Chg

CAPS Rating
(out of 5)

CIT Group

$27.92

$40.70

45.8%

*

Bank of America (NYSE: BAC  )

$15.79

$18.05

14.3%

***

Wells Fargo (NYSE: WFC  )

$27.63

$32.72

18.4%

***

Source: GuruFocus and CAPS.

Price is what you pay
Eddie Lampert was just one in a long line of hedge funds that took a stake in CIT Group last year. Carl IcahnSeth KlarmanDaniel Loeb and Richard Perry have all been profiled here after taking large stakes in the small business financier. Considering the performance afterwards, it's clear why the money managers are often considered the smartest guys in the room.

CAPS members remain equally divided on its future, with almost exactly half falling on either side of the performance spectrum. You can tilt the scales in either direction by staking your opinion on the CIT Group CAPS page.

Yet the level of feckless abandon with which Bank of America, Citigroup (NYSE: C  ) , and Goldman Sachs (NYSE: GS  ) pursued profits that led to the near total collapse of the financial system makes it tempting to relish any comeuppance they receive from Congress and others. But many say it was our political leaders and their handmaidens who facilitated the crisis, and their current policies are only adding to our discomfort. My Foolish colleague Alex Dumortier points out the Fed's monetary policy is allowing JPMorgan Chase for one to simply print money risk-free.

CAPS member joshy0077 believes Bank of America is at least one bank that has taken the steps necessary to reform itself.

[Bank of America] has proven it's resiliency in recent months, particularly with a strong showing in it's Q1 results. This bank has exceptional downside protection and will continue to rise in price following whatever decision the government makes on financial reform. At these prices (mid-low 18's) [Bank of America] is still a bargain.

Admittedly Wells Fargo went on a bit of an indulgent shopping spree, adding perhaps unnecessary exposure to the commercial real estate market with its acquisition of Wachovia, but in general the bank is considered a paragon of conservative management.

Of the 4,147 CAPS members that have rated Wells Fargo, more than 3,600 -- over 87% -- believe it will still outperform the broader market. You can deposit your opinion of the bank's bottom line on the Wells Fargo CAPS page.

Value is what you get
Become an investing legend yourself by starting 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.

Fool contributor Rich Duprey does not have a financial position in any of the stocks mentioned in this article. You can see his holdings here. The Motley Fool has a disclosure policy.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 28, 2010, at 5:31 PM, DrRoberts1 wrote:

    "Admittedly Wells Fargo went on a bit of an indulgent shopping spree, adding perhaps unnecessary exposure to the commercial real estate market with its acquisition of Wachovia, but in general the bank is considered a paragon of conservative management."

    Just whose admission is this?

    More flagrant nonsense posted on this site. At least the commentator got the "conservative management" part right but then a bank does not remain in business for over 150 years without bedrock core principles.

    Former CEO Richard Kovacevich had Wachovia in his sights for years. Why? Because up until the acquisition, WFC was west of the Mississippi and Wachovia east. With one fell swoop Mr. Kovacevich made Wells Fargo a bank with a national footprint and did so at a fire-sale price. Wells Fargo even got the Treasury to issue a favorable ruling on writing off 25 billion of Wachovia toxic debt.

    There are those that pontificate as they attempt to record their own version of history and then there are those actors with vision that actually create history. Richard Kovacevich and his team pulled off perhaps the greatest bank takeover in the history of our country. What is Rich Duprey's claim to fame?

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