Invest Alongside the Masters

Scraping together enough coin to win the annual luncheon auction with Warren Buffett is probably beyond most investors' means. With the proceeds going to charity, this year's winning bidder forked over $2.63 million for the privilege.

While we likely can't afford to break bread with the greats, we can peek at their stock ideas through their SEC filings. Here, we'll pore over some of the top investors' reports to see which stocks they've chosen as their best investments. We'll then check in with Motley Fool CAPS members to learn whether they agree.

First, the caveats

  • There's a delay between when the stocks were bought and when these investors filed their paperwork, so they might have sold since.
  • These legends may be hot investors now, but that can change in an instant. Bill Miller was a wunderkind after 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
Fools should definitely do their own further research. But in the meantime, let's take a look at Whitney Tilson, one of the "Ts" in T2 Partners (the other is Glenn Tongue), a hard-core value investor in the vein of Buffett and Graham who's made beating the market in these down times look easy.

Fund: T2 Partners LLC
No. of Stocks Owned: 89
Top Five Holdings: General Growth Properties, Berkshire Hathaway, GHL Acquisition, Anheuser-Busch InBev (NYSE: BUD  ) , Kraft
Top Sectors: Financials, oil and gas, consumer services, consumer goods

Like many of the investing legends we've looked at, Tilson has a rather diversified portfolio, so let's look closer at a few of his most recent choices.

Stock

Average Price

Current Price

Change

CAPS Rating
(out of 5)

Anheuser-Busch InBev

$49.10

$55.05

12.1%

****

InterOil (NYSE: IOC  )

$58.63

$60.70

3.5%

*

Seagate Technology (NYSE: STX  )

$17.03

$11.03

(35.2%)

***

Source: GuruFocus and Motley Fool CAPS.

Price is what you pay
Tilson wasn't wearing beer goggles when he purchased shares of Anheuser-Busch InBev. Organic volume at the world's largest brewer rose more than 2% even as sales fell year over year because it shed a number of brands. Ambev (NYSE: ABV  ) might taste better to Buffett and Molson Coors (NYSE: TAP  ) may be flush with cash, but it's hard to argue with Anheuser-Busch InBev's distribution and pricing power. There may be concerns over gaining traction in North America, its largest market, but at 14 times next year's earnings, that may already be priced in.

Valuation would also likely be behind the purchase of Seagate Technology, which along with Western Digital (NYSE: WDC  ) would seem to have the most to lose from Intel's (Nasdaq: INTC  ) profit warnings. With higher exposure to PCs, where all is doom and gloom, the drive makers sport minuscule market multiples, suggesting investors are just about looking for the disappearance of the industry. iPads might eat into PC sales, but there's a point where valuation just becomes too cheap to ignore.

Don't misunderstand
Perhaps the most misunderstood position in Tilson's portfolio is his long position in InterOil, which he has previously said he expects to blow up spectacularly. But rather than an about-face, Tilson is simply looking to offset his very large short position and gain a wedge to trade the stock. He still firmly believes the Australia-based company won't be able to commercially develop whatever reserves it has.

That would seem to align with what investors are feeling at CAPS, where 60% of those rating the oil play have marked it to underperform the broad averages. CAPS member jsch08 says at current valuations, "This is not a good value, selling at a 6X it's book value. No cash and not a profitable business."

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.

Berkshire Hathaway and Intel are Motley Fool Inside Value recommendations. Berkshire Hathaway is a Motley Fool Stock Advisor choice. The Fool owns shares of and has written puts on Intel. Motley Fool Options has recommended buying calls on Intel. The Fool owns shares of Berkshire Hathaway and Iridium Communications (GHL Acquisition). Try any of our Foolish newsletter services free for 30 days

True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community. The Motley Fool has a disclosure policy.

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


Read/Post Comments (2) | Recommend This Article (2)

Comments from our Foolish Readers

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 September 13, 2010, at 5:09 PM, kencooksam wrote:

    This Caps member has a better posted on Fool track record then 99% of the other Caps members.

    I recommended IOC at $12 a mere 18 months ago.So if you follow me you are up 5 times your money.At that time the average Cap rating was 1 star. So following the Caps star system doesn't work as an investing technique as per the facts.

    Persons screening for stocks using standard screening tools that as cash flow, P/E, will miss IOC.

    Whats to miss? Well with all emerging resource stocks one needs to look at the assets and then what are the plans for monetization.Its essentially a Buffett story who learned from Ben Graham.Ben wrote the Intelligent Investor which asked investors to look at assets when evaluating stocks.

    IOC has found the two largest NG wells in the world.Certified by numerous outside parties.IOC doesn't have its own testing equipment so such companies as Haliburton and Schlumberger have run all their tests.The GLJ rresource report compares IOCs assets to Arun.As of Dec 2009 IOC has 9 T's of NG and 160 million barrels of condensates.Arun has produced 60 T's of NG so far and was 40% of Mobil Oils profits for 20 years.

    IOC has been a sell down of assets mode for over one year now.The three Wall Street firms that cover IOC have an average of $100 as their target price post deals.So that would be a 66% return on your money. Those same three firms state IOC will monetize some of their assets before year end 2010. So one should be long IOC going into the monetization cycle.

  • Report this Comment On September 13, 2010, at 11:49 PM, EdgeTrader2001 wrote:

    Obviously, you've missed T2's discussion of their IOC short position and the numerous corrections to the mis-perception that T2 is long IOC. Whitney Tilson and Glenn Tongue have openly said they believe IOC is a fraud.

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