Scraping together enough coin to win the annual luncheon auction with Warren Buffett is probably beyond the means of most investors. With the proceeds going to benefit charity, this year's winning bidder forked over $2.63 million for the privilege.
Feast or famine
So maybe we can't afford to break bread with the greats, but we can peek at their stock ideas through their SEC filings. What we'll do here is pore over the reports of some of the top investors and see which stocks they've chosen as their best investments. We'll then check in with Motley Fool CAPS members to see if they agree.
First, a couple of caveats
- There's a delay from when the stocks were bought and when these investors file their paperwork so they might have sold out since.
- And these legends may be hot investors now, but that can change in an instant. Bill Miller was a wunderkind for 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 one of the well-known value investors in the vein of Buffett and Munger, Mohnish Pabrai of Pabrai Investment Funds. Back in February, when we first looked at The Dhando Investor author, he was heavily invested in basic materials, and though most of the names are the same, Pabrai has sold out of most of his holdings in Teck Resources (NYSE: TCK ) , going from more than 1 million shares, to around 5,500.
Fund: Pabrai Investment Fund
No. of Stocks Owned: 17
Top 5 Holdings: PotashCorp (NYSE: POT ) , Brookfield Properties, Harvest Natural Resources, Fairfax Financial, Berkshire Hathaway (NYSE: BRK-B )
Top Sectors: Financials, Basic Materials, Oil & Gas
Like a number of the investing legends we've looked at, Pabrai has a concentrated portfolio with little turnover. In fact, aside from mostly exiting Teck, he has added only one new company, International Coal Group (NYSE: ICO ) . So we'll take a closer look to see what CAPS members have to say.
Price is what you pay
Pabrai's holdings in Berkshire Hathaway have increased in number and value, but that was really only as a result of the 50:1 split in the wake of Buffett's purchase of Burlington Northern. It's still a firm commitment by Pabrai to the Oracle's ability to generate outsized returns for his shareholders, yet by selling out of Teck, the weighting of Berkshire in his portfolio increased, putting it into the top five.
You're not going to find too much dissension in the CAPS community, as more than 98% of the nearly 5,500 members rating Berkshire's B shares expect them to outperform the market. While Pabrai is a long-term investor, Buffett's vehicle hasn't been helping his returns throughout much of the last quarter. The shares lost 16% of their value at one point, but have since clawed their way back up to break even.
[T]he company is a good diversification tool for most of us who are heavy in 'new economy' stocks and have no good understanding of the 'old economy' companies, such as insurance companies. (To be specific, the reinsurance business is lucrative, especially overseas).
Pabrai's largest holding, Potash, isn't helping performance either at the moment. Its shares are down 20% since the start of the quarter, but the whole sector is off. Monsanto (NYSE: MON ) is down more than 32%, admittedly in part because of management's negative guidance on Roundup. Mosaic (NYSE: MOS ) and Agrium (NYSE: AGU ) have fallen similar amounts, as commodities fall on fears of a double-dip recession.
It has been dragged down by the market and actually has fallen faster than market. But since it started its correction way before the market did, its relative price level is pretty cheap now.
Pabrai's purchase of International Coal stock is treading water right now. Highly publicized mine disasters may have made some investors wary, but International Coal says there's enough demand for metallurgical coal that it's resuming construction on a new mine that should start producing by the middle of next year.
With 96% of the CAPS members who weighed in agreeing that International Coal will outperform the broad market averages, it seems like Pabrai's bet on the resurgence in coal was a timely one. You can dig deeper on the International Coal CAPS page and let us know if this plentiful resource will now see the light of day in response to the Gulf oil spill.
Value is what you get
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