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 to 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 few caveats ...
- There's a delay between when the stocks were bought and when these investors file 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 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 famous investor Bruce Berkowitz, whose Fairholme Capital Management we looked at back in February.
Fund: Fairholme Capital Management
Number of Stocks Owned: 21
Top 5 Holdings: Bank of America
Top Sectors: Financials, consumer services
Like a number of the investing legends we've looked at, Berkowitz has a highly concentrated portfolio, but it's notable that despite signs pointing to a new recession, he has been in there buying financial stocks. While that seems counterintuitive, Berkowitz believes that after the previous recession, banks "fortified" their balance sheets, so should they suffer new stressors, they are prepared.
But while Berkowitz was adding Bank of America and AIG to his portfolio, he was also selling out of a number of health-care companies, notably WellPoint
Price is what you pay
With the government holding such a large stake in AIG, the risk to Berkowitz and other investors is that if the government starts selling its shares, their stake in the insurer would be severely diluted. Perhaps also indicating how undervalued he views financials, Berkowitz just recently filed a report with the Securities and Exchange Commission that he bought a huge slug of bond insurer MBIA
Berkowitz now owns 24% of AIG, up from 19% in his previous report, and he says the Fairholme Fund (FAIRX) will be happy to hold onto its stake for the next decade. That's not how CAPS All-Stars see the situation, with many panning the insurer's business. Beorn10 says that because of government handholding, "profits are no longer a priority," while jed71 says it's impossible to value the company because it "would be based on what assets the government decides to let them keep."
Now at the same time Berkowitz was getting sick of health-care stocks and dumping WellPoint, Buffett did the same thing at Berkshire, clearing the stock out of his portfolio. The reason might be found in TMFHelical's suggestion that "(m)argins are going to be stressed in the next few years, as the burdens of health care reform hit these companies now."
Berkowitz's latest maneuverings suggest the health-care industry faces a more uncertain future than financials do because financials have an enormous backstop in the government. And having repaired their balance sheets after the latest fiasco, they're better prepared to handle future crises. WellPoint and other health-care companies, on the other hand, will be grappling with new regulations for years.
Value is what you get
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