3 Stocks I'm Buying

As an analyst for The Motley Fool, I manage a real-money account for the world to see. It focuses on my specialty, banks and financials, and today I'm announcing three buys -- one a new stock (Berkshire Hathaway (NYSE: BRK-B  ) ) and two that are adding to positions I've already established (AIG (NYSE: AIG  ) and Wells Fargo (NYSE: WFC  ) ).

Berkshire Hathaway
The House that Warren Buffett built has, of course, been on my radar since I opened the public-facing real-money account in late 2010. Owning a piece of the vast insurance-anchored conglomerate is a bet that even at Berkshire's large size, Buffett can beat the market.

Price, as always, is a key consideration. Throughout the past couple of years, I've thought Berkshire's barely above-book-value price tag to be quite cheap. As evidence, Buffett announced earlier this year that Berkshire would consider buying back shares at 1.1 times book value. Recently, he upped that threshold to 1.2 times book value as part of an estate purchase.

With shares at around 1.2 times book value now, I'm ending the "wait-for-the-perfect-price" game and buying some shares at a reasonable price. I'll consider buying more if its price falls.

AIG
I initiated a position in AIG back in September, as the government was rapidly reducing its bailout stake. Now, it's finished its sales (not including warrants), leaving Bruce Berkowitz's Fairholme Funds as the leading investor.

Beyond master investor Berkowitz's bullishness on the turnaround and the cessation of government selling pressure on shares, AIG has been shoring up its balance sheet via selling non-core businesses and is selling for half of its book value. In addition, I believe the next big insurance scandal will come elsewhere. The public scrutiny on AIG should make it more conservative in sticking to its core insurance business (versus playing Muppet to Wall Street).

If AIG is able to stay on the straight and narrow, I'm betting it will be a strong winner from here.

Wells Fargo
This will be my third purchase of Wells Fargo. I bought shares at debt-ceiling-scare prices back in August 2011 and then close to today's price a few months ago in September.

Of the four big U.S. retail banks (Bank of America (NYSE: BAC  ) , Citigroup (NYSE: C  ) , and JPMorgan Chase (NYSE: JPM  ) being the others), Wells Fargo is by far the simplest and least Wall Street. It focuses on execution rather than the exotic.

During the financial crisis, it gobbled up troubled bank Wachovia, and recently it's been feasting on the spreads in the mortgage securitization market (capturing a one-third share!).

When you look at the normal bank metrics, its value can be underestimated. Assets from the Wachovia acquisition can still obscure lending metrics, and it's selling well above book value (JPMorgan is selling below book value and B of A and Citi are selling well below book value).

The premium price is justified because of Wells' quality and the latent power in the Wachovia purchase. And that premium price tag is still well below Wells' historical norms.

You can follow all the moves in my real-money account here.

More on Wells Fargo
To learn more about Wells Fargo, I invite you to download our premium research report. Click here now for instant access to this in-depth take on Wells Fargo.


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