Stocks the Investing Superstars Are Buying

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 at famed value investor Martin Whitman, the founder of Third Avenue Management. While his Value fund is the primary vehicle for his investing philosophy, all of his funds have a value outlook.

  • Fund: Third Avenue Management
  • No. of Stocks Owned: 92
  • Top 5 Holdings: Brookfield Asset Management, Posco, Forest City Enterprises, Bank of New York Mellon, Cimarex Energy
  • Top Sectors: Financials, Oil & Gas, Basic Materials

Like a number of the investing legends we've looked at, Whitman has a fairly diversified portfolio, but it's notable that despite many signs pointing to a new recession, he's been fearlessly buying financial stocks. (It seems everyone these days wants a piece of CIT Group (NYSE: CIT  ) .) Yet he's also added a few other non-financial companies. We'll look at a few of his choices below:

Stock

Average Price

Current Price

% Change

CAPS Rating (out of 5)

KeyCorp (NYSE: KEY  )

$5.87

$7.74

31.9%

**

Weyerhaeuser (NYSE: WY  )

$25.60

$15.94

62.3%

***

ConocoPhilips (NYSE: COP  )

$42.80

$52.66

23.0%

*****

Source: GuruFocus and Motley Fool CAPS.

Price is what you pay
Housing is still in dire straits. Though new building permits came in ahead of expectations, according to the Census Bureau, housing starts for June of 549,000 fell well below forecasts of 575,000. That figure's also 5% below May's revised numbers, and nearly 6% below June 2009, giving investors a new reason to freak out. President Obama's expired tax credits simply pulled in sales from future periods, and the industry is reeling now from the dearth of buyers. With significant overhang from foreclosed and short-sale properties, there's little willingness to spend big on a new house.

Banks with extensive exposure to mortgages, like KeyCorp, First Horizon National (NYSE: FHN  ) , and Regions Financial (NYSE: RF  ) are likely to continue facing pressure from the situation. KeyCorp's stock has recovered from the worst of it, but CAPS member knightmine thinks it still represents a good takeover target. A third of CAPS members have rated KeyCorp to underperform the market, but they might be willing to have someone step in and save the company.

Weyerhaueser has also gained ground from the lows hit last year, but it's also weighed down by the housing situation. It is converting to a real estate investment trust to help lower its tax liabilities, while hopefully increasing the competitiveness in managing its timber portfolio against similarly situated REITs like Plum Creek Timber (NYSE: PCL  ) . The wood and paper products giant paid out a special $26 dividend to shareholders yesterday as part of its conversion.

Many CAPS members are looking forward to its ultimate change in status; 80% of those rating the forest products firm believe it will outperform the market.

A better housing market would probably signify an improving economy, which would lead to greater industrial demand for oil. China's emergence as the world's biggest energy consumer -- a point it hotly denies -- makes the prospects for ConocoPhilips' future growth more secure.

According to the International Energy Agency, China surpassed the U.S. as the most oil-, gas-, coal-, and nuclear-hungry country in the world, consuming the equivalent of 2.25 billion tons of oil last year. As Q36 says, ConocoPhillips will benefit from rising world oil demand:

COP is well positioned to eventually command a strong position as energy prices are driven up by decreasing supply and a slowly recovering world economy.

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.

Brookfield Asset Management is a Motley Fool Global Gains selection. The Fool has created a covered strangle position on Plum Creek Timber. Try any of our Foolish newsletter services free for 30 days.

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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