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 value investor investor Seth Klarman, the well-known, if somewhat enigmatic, founder of Baupost Group, and the author of the equally elusive investing classic Margin of Safety. We looked at his trades back in March; let's see where he's gone since then.
Company: Baupost Group
No. of Stocks Owned: 18
Top 5 Holdings: ViaSat, Theravance, NewsCorp, Breitburn Energy Partners, Enzon (Nasdaq: ENZN )
Top Sectors: health care, technology, consumer services
Like a number of the investing legends we've looked at, Klarman has a fairly concentrated portfolio. But it's notable that while he has invested in the financial sector, he hasn't gone overboard like many of his peers. Specialty finance company CapitalSource (NYSE: CSE ) is his one of his few financial stocks, one that's a favorite of another investing guru, Monish Pabrai. So let's look closer at a few of his other choices below.
|
Company
|
Average Price
|
Current Price
|
% Change
|
CAPS Rating (out of 5)
|
| Alere (NYSE: ALR ) |
$29.09
|
$33.90
|
16.5%
|
*****
|
| Regeneron Pharmaceuticals (Nasdaq: REGN ) |
$24.02
|
$30.10
|
25.3%
|
**
|
Source: GuruFocus and Motley Fool CAPS.
Price is what you pay
In such a concentrated portfolio, turnover hasn't been prevalent in the latest quarter, with Klarman selling out of his position in ADC Telecommunications only after it was purchased by Tyco Electronics. In the quarter, he added a small bit to his position in Enzon. Klarman also purchased two new stocks, medical diagnostic products maker Alere (which changed its name this past summer from Inverness Medical Innovations) and Regeneron Pharmaceuticals. While he more than doubled his position in Liberty Media Starz (Nasdaq: LSTZA ) , his holdings in Audiovox (Nasdaq: VOXX ) have some smart Fools sitting up and taking notice.
Alere saw revenue in North America plummet in the third quarter as North American flu vaccine sales fell to just $7 million, from $40 million a year ago. No doubt the lack of a H1N1 pandemic hurt the sales effort, as worldwide respiratory device sales also declined. Yet like Klarman, 91% of the CAPS members rating Alere expect it to outperform the market.
Klarman probably also saw the potential in Regeneron's treatment for age-related macular degeneration (AMD), which could halve the number of needle sticks a patient must endure each year. The biopharmaceutical's VEGF Trap-Eye would only require an injection every other month, as opposed to Roche's monthly shot of Lucentis. After two positive phase 3 trials, the treatment is looking good for getting the nod from the FDA.
Another Regeneron drug in late stage trials is aflibercept, a version of VEGF Trap that prevents blood-vessel growth in solid tumors. Regeneron has partnered the drug with sanofi-aventis (NYSE: SNY ) , and it promises an even bigger market than AMD.
It was earlier this year that CAPS member gangsterchen was admiring Regeneron's pipeline, but you can tell us on the Regeneron Pharmaceuticals CAPS page whether Klarman is right to have his eye on this biopharmaceutical.
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.
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