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 another look at Eddie Lampert, the self-styled Buffett protege, Sears Holdings
- Fund: ESL Investments
- No. of Stocks Owned: 10
Top 5 Holdings: Sears Holdings, AutoZone
(NYSE: AZO), AutoNation, Capital One Financial, CIT
- Top Sectors: Consumer Services, Financials
Like a number of the investing legends we've looked at, Lampert has a very concentrated portfolio, but he notably lavishes his attention on Sears and (to a lesser extent) AutoZone. Since we last looked at Lampert's activity, though, he hasn't added any new companies to his portfolio, but has instead drastically lowered his exposure to some financial stocks: positions in Wells Fargo
Price is what you pay
Lampert also took a little money off the table when it came to Sears Holdings, with pretty good timing. After peaking at around $124 a share in May, the stock has since collapsed, falling at one time to just $60. It now trades around $72 a stub.
By now, we're all pretty familiar with Lampert's tendency to juice performance through hedge-fund tactics. But earlier this year, he was actually able to post a profit that more than doubled the previous year's earnings. And last quarter, the Sears chain actually posted its first positive comps numbers in years, though profits were down and margins were narrower. With second-quarter earnings due out in a few weeks, we'll see which way Lampert's efforts have taken the retailer.
I'm not hopeful, though. The retail sector anticipates that back-to-school season will be very weak, and many retailers stole a page from Sears' own playbook by hawking "Christmas in July" promotions. Retailers seem so worried about consumer spending that they're trying to make every day Christmas, with Sears, Toys R Us, and even Target
Although 72% of the more than 2,100 CAPS members rating Sears think it will go on to outperform the broad market averages, its one-star rating suggests you can stock up on better retailers. Shop your own opinion on the Sears Holdings CAPS page.
Delivering the goods
When he's not rummaging through retail, Lampert sells you used cars through AutoNation, and the parts to fix them at AutoZone. Perhaps the used cars coming on the market are better than they've been in the past, however; Lampert got out of the Zone by selling a few shares of the auto parts retailer (even as management there continues buying them back), while picking up a few more shares of the used car dealer.
Now there's a flip side to this story. First, I'm actually quite unimpressed that management continues its share buy-back at this time. Instead of paying such a steep premium for equity, I think that investors would be better served if management would use free cash flow to accelerate the retirement of the company's $2.7B in debt. Now is the time when AZO should be cleaning up its balance sheet by refinancing at lower interest rates what it can, and by retiring the remainder.
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 seem to think they are.