Invest With 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.

Feast or famine
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, a few caveats ...

  • There's a delay between when the stocks were bought and when these investors filed their paperwork, so they might have sold out 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 here. But in the meantime, let's take a look once again at well known value investor Monish Pabrai, managing partner of Pabrai Investment Funds. When last we looked at his investments, Pabrai had moved away from consumer goods and invested heavily in financials and energy.

Fund: Pabrai Investment Funds
No. of Stocks Owned: 16
Top 5 Holdings: Fairfax Financial, Brookfield Properties, Harvest Natural Resources, Potash (NYSE: POT  ) , Cresud
Top Sectors:
Financials, Basic Materials, Oil & Gas, Industrials

With a very concentrated portfolio of just 16 stocks, we find that true to form, Pabrai has made few changes in his holdings. He completely sold out of his holdings in Teck Resources (NYSE: TCK  ) and Interactive Brokers (Nasdaq: IBKR  ) , while adding even more to his Potash stash. So let's look closer at a few of his biggest positions below.

Price is what you pay
Late last year, after being excoriated for negotiating deals to sell back to banks warrants it had been given as part of the TARP bailout at just two-thirds of their value, the U.S. Treasury Department began auctioning them off.

With warrants from PNC Financial Services (NYSE: PNC  ) , Valley National (NYSE: VLY  ) and others on the block, Treasury suddenly generated a much better return for the taxpayer, getting around 92% of their value.

No doubt the increased value was due in part to the banks themselves participating in the auction. Wells Fargo was one of those buying its warrants, purchasing more than 70 million of the 110 million Treasury was putting up for sale. But so was Pabrai, and it's turned out to be a good investment thus far. While Wells stock is off 3% for the year, the warrants are actually up 12% from their issue price of around $7.70 in May.

The pot calling out the kettle
Potash investors must feel like they're being dragged to a shotgun wedding. The minerals giant is casting about for someone -- anyone! -- to save it from the ardor of BHP Billiton (NYSE: BHP  ) , which has offered to pay the "grossly inadequate" sum of $130 a share. While Chinese fertilizer company Sinochem is often mentioned as a possible rescuer, there are reports of several other possible suitors, including Teck.

CAPS investors have long believed Potash would be a market-beating performer, as 96% of those rating the fertilizer giant indicated they thought it would outperform the broad market averages. Yet if rumors about Teck are true, Pabrai could end up once again owning its shares.

A source of encouragement
Yet it was Pabrai's ownership of CapitalSource that attracted highly rated CAPS All-Star member maxamillionaire to the specialty finance company: "multiple hedge funds from Klarman's to Pabri's to Ichan's have recently added CapitalSource to their portfolios. Who am I to disagree?"

Shares have been rising steadily since their June lows and are up by about 50% since then. CAPS member wavaddict says CapitalSource has changed its ways and should continue to improve its returns: "CapitalSource has positioned itself and evolved with a very difficult market, for the better. Their model will outperform its competitors with slow steady positive returns."

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.

Interactive Brokers Group is a Motley Fool Stock Advisor recommendation. The Fool owns shares of CapitalSource and Interactive Brokers Group. 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 here. The Motley Fool has a disclosure policy.


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