By Morgan Housel February 18, 2010 | Comments (6)
Recs
David Gardner called it. He's up 1,334%! See what David's recommending that you buy NEXT.
Like most of us, I was forced to read The Prince by Machiavelli at some point during my school years. I don't remember much from it, save for this quote:
A prudent man should always enter by the paths beaten by great men and imitate those who have been most excellent, so that, if his own skill does not come up to theirs, at least it will give off something of the odor of theirs.
A bit cheesy, but it's true: If you're trying to learn something, don't subject yourself entirely to trial and error. Find out who's really good at what you're trying to learn, and watch what they're doing.
That's why it's great news that most of the world's best investors are required to periodically report their big portfolio moves. They're called SEC 13-F filings, and every quarter, they give us a glimpse into the minds of masters.
Here's what some big money movers have been up to lately.
George Soros Universally known as one of the best investors ever, Soros knows how to make money ... sometimes. He tends to be wrong a lot of the time (as he admits), but staggeringly, off-the-charts right once in a while. As long as the winners destroy the losers, he's good to go.
Over the past quarter, Soros's hedge fund purchased a new 95-million-share investment in Citigroup (NYSE: C), and doubled down on its investment in the SPDR Gold Trust ETF. As of yesterday's closing price, the Citigroup stake is worth $321 million, while the gold ETF bet is worth $673 million. Those two positions alone make up around 11% of the fund's total reported holdings.
David Einhorn Einhorn plays a mean hand of poker, looks like he's about 16, and can dismantle financial statements like no one's business. He's been a respected hedge fund manager for years, but he really came into glory in 2008, after being one of the first to call out Lehman Brothers' accounting absurdities and asset-valuation smokescreens. (He won that hand.)
Over the past quarter, Einhorn's hedge fund, Greenlight Capital, opened new positions in Boston Scientific (NYSE: BSX), Becton Dickinson, Energy Partners, and Ralcorp Holdings. At 32 million shares, the Boston Scientific position is the only sizable purchase.
Mohnish Pabrai Pabrai's an up-and-coming hedge fund manager (professionally managing money for about 10 years) who worships Warren Buffett like you wouldn't believe. He's also one of the only Buffett followers to post Buffett-like results, with his main fund returning almost 17% per year after fees since 2000, obliterating a flat market. (I interviewed Pabrai in 2008 here and here.)
Over the past quarter, Pabrai bought a 2.8-million-share stake in CapitalSource (NYSE: CSE), a supplier of specialty credit. This is a curious move, since he's voiced distaste for small financial companies after being burned by the 2007 bankruptcy of Delta Financial. I guess cheap is cheap when you see it. Pabrai also added to his stake in PotashCorp (NYSE: POT), bringing his bet on the company up to about $39 million, one of his largest positions.
John Paulson After making a severely ridiculous amount of money -- $20 billion -- shorting the housing market, John Paulson is either the luckiest one-hit wonder to ever live, or the next investing mastermind. It's still too early to tell, but it's worth following him anyway.
Paulson's fund has been loading up on bank stocks and gold over the past year. This past quarter, it bought another 200 million shares of Citigroup, and held firm on its already massive stake in Bank of America (NYSE: BAC). Those two holdings are now worth $1.7 billion and $2.5 billion, respectively. This guy isn't messing around.
Warren Buffett No introduction needed. Berkshire Hathaway's (NYSE: BRK-B) latest quarterly filing shows buying activity in Becton Dickinson, Iron Mountain, Republic Services, Wal-Mart (NYSE: WMT), and Wells Fargo.
Before you get too excited, know that some of Berkshire's smaller holdings, like Becton and Iron Mountain, are likely the work of Lou Simpson, who independently runs Berkshire subsidiary GEICO's investment portfolio. Either way, both Simpson and (obviously) Buffett are worth paying attention to.
A word of caution These picks are great starting points for further research, but they shouldn't be taken as more than that. The two things you'll never learn from 13-F filings are the most important: Why the investors are buying, and when or what would make them sell. Blindly following the leaders is no substitute for learning from them.
Thoughts? Share away in the comment section below.
Fool contributor Morgan Housel owns shares of Berkshire Hathaway, a Motley Fool Stock Advisor selection. Berkshire and Wal-Mart Stores are Motley Fool Inside Value recommendations. Republic Services is a Motley Fool Income Investor recommendation. The Fool owns shares of Berkshire Hathaway and CapitalSource and has a disclosure policy.
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tat's funny....Buffett buys more Wal*Mart and sells some Johnson and Johnson and Wal*Mart kicks Glad and Hefty off their selves and keeps J&J....
in my eyes...neither WMT or BRK would be a buy at tis time....
with Buffett selling off a little of Johnson and Johnson and buying more Wal*Mart and Wal*Mart kicking Glad and Hefty off their selves and keeping Johnson and Johnson....who in their right mind would buy BRK and WMT at tis time.
Morgan Housel,
You really dropped the ball on Soros. In Davos, he made extremely negative comments about gold, calling it a bubble. Yet you fail to mention this.
Your data only goes through December 31, 2009. His Davos comments occurred in January 2010, which obviously means that he sold a lot of his GLD in the new year.
Do your homework before writing an article.
Take it easy, Henry. What did Soros say right after his bubble comment?
"As a participant, when I see a bubble, I rush out and buy."
Apologies welcomed whenever you're ready.
While it may be just fine to buy what the "Great Investors" are buying and leave it at that, it is FAR FAR more important to understand the WHY they are buying what they buy. Is the purchase they made a Macro bet on a Megatrend in the economy or market or did they buy what they bought for a very company specific or value reason. This difference is vitally important.
If it was a Megatrend, they may be other companies, usually much smaller, that offer similar exposure to the same Megatrend but at better value. Warren Buffett and George Soros as well as others can only buy large capitalization companies otherwise the pressure from their purchases would quickly over-price what they want to buy. There is a also a lag between their purchases and when the purchase is reported on the SEC 13-F filing.
KCFA tends to buy small capitalization companies that sell well below their <I>Intrinsic Values</i> such as A.T. Cross & Company(ATX) in the $2 to $2.25 per share range in early 2009. Chart: http://finance.yahoo.com/q/bc?s=ATX&t=2y&l=on&z=...
A. T. Cross is a manufacturer of High Quality ballpoint and fountain pens as well as accesseries usually of leather. The shares are still a reasonable value under $4 per share for long-term investors.
Kahuna, CFA
18 February 2010
vier 2009
Kahuna,
Your point was addressed in the article:
"The two things you'll never learn from 13-F filings are the most important: Why the investors are buying, and when or what would make them sell."
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