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
So, do further research, but in the meantime, let's take a look again at famed "trade of the century" investor John Paulson, whose Paulson & Co. bet big against the housing market and won; earlier this year, it was questioned in the Goldman Sachs fraud scandal. We looked at his trades back in May; let's see where he has gone since then.

Company: Paulson & Co.     
No. of Stocks Owned: 80
Top 5 Holdings: Anadarko Petroleum (NYSE: APC  ) , Hewitt Associates, NBTY, McAfee, Bank of America
Top Sectors:
Financials, basic materials

Like a number of the investing legends we've looked at, Paulson has a fairly diversified portfolio. But it's notable that while investing in the financial sector like many of his counterparts, he also remains heavily invested in oil. Despite selling out completely from ExxonMobil (NYSE: XOM  ) , he bought into Anadarko in a big way, making it his single largest holding. So let's take a closer look at a few of his other choices.

Stock

Average Price

Current Price

% Change

CAPS Rating 
(out of 5)

Brocade Communications (Nasdaq: BRCD  ) $5.30 $5.03 (5.1%) ****
PotashCorp (NYSE: POT  ) $124.33 $144.93 16.6% ****
Genzyme (Nasdaq: GENZ  ) $65.38 $71.14 8.8% ***

Source: GuruFocus and Motley Fool CAPS.

Price is what you pay
With IBM not immediately moving to acquire Brocade Communications, as heard in rumors, investors had to look to Brocade's earnings report to sustain the momentum. But like Cisco before it, Brocade has found business's appetite for equipment unappealing; revenues for the latest quarter were below what analysts were anticipating for the company, which makes switches for data storage equipment.

While demand is slack, it isn't nonexistent, and CAPS member wil3714 finds Brocade's share price attractive.

SANs, servers need to be managed & spending for disaster recovery, security, & maintenance of servers wont go away even in a recession.... companies need [their] data managed & paperless files are going electronic, storage is the future

Surprisingly, though, PotashCorp has been able to maintain its lofty stock price despite BHP Billiton (NYSE: BHP  ) withdrawing its bid. PotashCorp, a fertilizer producer, had said all along that BHP Billiton was undervaluing it, but the stock remains 30% higher than where it was before the offer was made. Management's buying back its stock, announcing a $2 billion repurchase program that could take 14 million shares off the market.

Let us know in the comments section below or on the PotashCorp CAPS page whether you believe the stock is worth the premium.

I'll drink to that
You'd almost think Paulson had an inside track on takeover bids; he has made a big investment in Genzyme, yet another acquisition target. sanofi-aventis (NYSE: SNY  ) offered $69 a share for the biotech, but like PotashCorp, Genzyme is saying the offer is too low. Yet it's not completely opposed to a takeover by the pharmaceutical, particularly if Sanofi comes back with a higher offer that would take into account its turnaround efforts and the potential success of Campath, its multiple sclerosis therapy.

With Sanofi suggesting its offer is already "compelling," you can keep an eye on the melodrama by adding Genzyme into Fool.com's free portfolio tracker and have all the Foolish news and analysis compiled in one place.

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.

The Fool has written calls (bull call spread) on Cisco Systems. The Fool owns shares of International Business Machines. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. 

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.


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