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, last 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 another look at Eddie Lampert, the self-styled Buffett protege and founder of ESL Investments. As chairman of Sears Holdings (Nasdaq: SHLD), he's come under a lot of criticism for his stewardship there, but he expects the retailer to rebound from a double-digit loss in the third quarter to post a profit in the fourth. So let's see what other magic he might be working.
Fund: ESL Invstments
No. of Stocks Owned: 7
Top 5 Holdings: Sears Holdings, AutoZone (NYSE: AZO), AutoNation, CapitalOne Financial, CIT Group
Top Sectors: Consumer services
Like a number of the investing legends we've looked at, Lampert has an exceptionally focused portfolio, with three-quarters of his holdings comprised of just Sears and AutoZone.
He hasn't bought any new companies, but he did sell out his holdings in three of them: Acxiom, SLM, and Wells Fargo (NYSE: WFC). He also added to his position in insurance Genworth Financial (NYSE: GNW), but let's take a closer look at what CAPS members have to say his two largest holdings.
Price is what you pay
The fourth quarter profit Sears Holdings is expected won't be nearly enough to stem the rising tide of negative sentiment. Ratings agency Fitch Ratings lowered its already low investment status pointing to competitive pressures hurting sales. It expects adjusted profits in the second half of 2010 to be 16% to 22% lower than they were in 2009.
As if that wasn't enough, Target (NYSE: TGT) announced it would be expanding into Canada for the first time. Sears Canada has been the one bright spot in all of Sears Holdings operations -- it had to borrow $389 million from it last quarter -- and arguably without it the company would be much closer to ruination. Target is one of the reasons few shoppers find the need to spend their money at Sears or K-Mart anymore, and expansion north of the border now throws more curves at it than a clothing line from the Kardashians.
CAPS member umps15 says that just about anything you want to buy from Sears can be found elsewhere at a lower cost:
There is a sear's in a mall nearby. It is pretty much empty all the time. Nobody goes to sears or k mart anymore. You either go to target, walmart, or amazon. I cannot identify a single thing that sears does better than anybody else. If you want electronics, you go to best buy. If you want nice cheap cloth you go to target. If you want some food, you go to walmart. Online? forget it. Last quarter, they lost 290 million. I expect that this will happen more frequently.
You can let us know on the Sears Holdings CAPS page or in the comments section below just what, if anything, the retailer can do to change the direction it's heading in.
Tunneling down to growth
One of the key reasons AutoZone has been able to rally 60% over the past year and 77% over the last two is that despite recovery by Ford (NYSE: F) and General Motors, the catalysts for selling an older car to buy a new one still weren't in place. People were more than willing to hold onto an older model longer and fix it as economic uncertainty remained. Advance Auto Parts (NYSE: AAP) and O'Reilly Automotive were up 62% and 51% respectively, over the past 12 months, and even ailing Pep Boys was 49% higher.
Whether GM can remake itself as uniformly as Ford has engineered its turnaround remains to be seen, but the new car market is now in a decidedly better position than it once was, and that spells trouble for the auto parts sector. AutoZone, O'Reilly, and Manny, Moe & Jack have all given back about 8% in the past month.
CAPS member emtking says the changing dynamics of the auto industry means that investors would do better to move to Ford than AutoZone:
As we recover and new cars are sold, the need for parts to keep older cars running and on the road disappears. Inverse move to F for the next 2 to 3 years.
You can add AutoZone to the Fool's free portfolio tracker and to keep an eye on how the after market parts supplier is able to drive around this obstacle.
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.
