Scraping together enough coin to win the annual luncheon auction with Warren Buffet is probably beyond the means of most investors. With the proceeds going to benefit charity, last year's winning bidder forked over $1.68 million for the privilege.
But many investors would love the chance to chow down with Buffett and pick his brain on his investment philosophy and stocks he's considering buying. The same could probably be said for many other value investing legends, too.
Feast or famine
Maybe we can't 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.
Obviously, there are a few caveats with a strategy of piggybacking on the masters.
- There's a delay from when the stocks were bought and when they file their paperwork. If they were a good deal back then, are they still a good deal today? Have they sold out since?
- 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
That's why we say you'll need to do further research, but with those points in mind let's take a look at Bruce Berkowitz, the founder of Fairholme Capital Management, whose leading Fairholme Fund (FAIRX) had net assets valued at more than $10.5 billion. Berkowitz is a value investor who, unlike many portfolio managers, runs a highly concentrated portfolio of just a few dozen stocks. His investing philosophy is simple:
We tend to be greedy when others are fearful, yet fearful when others are greedy. This often translates into taking a different path, going it alone or standing apart from market manias. In short, we ignore the crowd.
Fund: Fairholme Capital Management
Website: http://www.fairholmefunds.com
Number of Stocks Owned: 26
Top 5 Holdings: Pfizer
Top Sectors: Health Care, Financials, Consumer Discretionary, Industrials.
Some of Berkowitz's services would require you to have a minimum account size of $5 million before he'll consider investing your money, or you can look at some of his best ideas below. They include completely new additions to his portfolio at the time of the filing and were the largest purchases relative to the size of the portfolio. They also include positions that he increased.
|
Stock |
Avg. Price |
Recent Price |
% Chg |
CAPS Rating (out of 5) |
|---|---|---|---|---|
|
Cardinal Health |
$30.86 |
$33.25 |
7.7% |
**** |
|
Leucadia |
$23.71 |
$22.08 |
-6.9% |
***** |
|
Berkshire Hathaway |
$97,473.90 |
$114,950.00 |
17.9% |
***** |
|
Humana |
$34.50 |
$46.82 |
35.7% |
*** |
Source: SEC Filings.
Naturally, we want you to look a bit closer at these stocks before buying. You can get low-priced appliances in the dent-and-ding section of your home-remodeling superstore, but their quality might not be so good. Same thing here: Make sure there's nothing seriously wrong with the company before you plug it into your own portfolio.
Price is what you pay
With the threat of a massive government intrusion into the health care industry at least momentarily off the table, Cardinal Health can focus on growing its distribution business. While profit fell in the second quarter after it spun off its medical technology business, CareFusion, Cardinal Health raised its guidance for the rest of the year, suggesting conditions are improving in the industry. That was underscored by both AmerisourceBergen and McKesson giving investors a preview that better times are ahead.
CAPS member alars79 thinks Cardinal would have benefited regardless of pending legislation, because its generic drug business would have dovetailed with the stated goals of health reformers to reduce costs.
New filibuster-proof Congress should reduce the risk of any sweeping health care changes in the near future. Their focus on growing generics would help them remain competitive regardless. Solid ROE, good work being done to increase focus on core competancies, and pharmaceuticals should continue to have recession- and inflation-resistant demand.
More than 400 members have distributed their opinion on the Cardinal Health CAPS page, with 92% believing it will outperform the broader market averages. Why not join them in injecting your voice into the discussion?
Value is what you get
It pays to start 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.
