Tag Archives: Warren Buffett

7 Stocks Billionaire Fund Managers Are Crazy About

Posted on 22. Mar, 2012 by .

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Guest Post By: Insider Monkey
Insider Monkey tracks nearly 400 hedge fund managers and prominent investors. Thirty nine of these fund managers are billionaires. Nowadays readers have access to websites that track the daily changes in billionaires’ wealth. We wanted to track the performance of billionaires’ top stock picks. By looking at our Billionaire Hedge Fund Index, investors may be able to decide whether it makes sense to imitate billionaires’ stock picks without paying them hefty fees. Warren Buffett, George Soros, John Paulson, Jim Simons, David Einhorn, Ray Dalio, and T. Boone Pickens are among the 39 billionaires we’re tracking. Billionaire fund managers’ top 30 stock picks returned 16.7% in 2012 as of March 16, vs. 12.3% gain in the S&P 500 ETF (SPY). Here are the top 7 stocks they’re crazy about:

1. Apple (AAPL) is the most popular stock among billionaire fund managers. Nearly half of them had a large position in Apple at the end of December. Apple is also the most popular stock among “ordinary” millionaire hedge fund managers (see the 10 most popular stocks). The stock gained 45% this year as of March 16th. We have been extremely bullish about Apple since we started writing here at Trading Deck at the end of September. Apple was the most popular stock among hedge funds at the end of September as well. We have been telling you that technology stocks are extremely undervalued as a sector and Apple had single digit forward PE multiple at the time. Today we are still very optimistic about the stock. Its 2012 forward PE ratio is 13.5 which is still less than the market. This is a stock that is expected to increase its earnings by nearly 20% per year over the next 5 years. It should easily trade above $800 over the next couple of years. Ken Griffin had the largest position in Apple at the end of December.
2. Google (GOOG) is the second most popular stock among billionaire hedge fund managers. The stock had a disappointing performance so far in 2012, losing 3.2% as of March 16. We are optimistic about Google as well. The stock’s 2012 forward PE ratio is 17 which is more than 25% higher than that of Google’s. They have similar expected growth rates though. We think Google deserves a slight premium over Apple because it is less exposed to competition from other search engines. This is not a stock that will go up 50% this year but it should deliver healthy returns over the long run. Julian Robertson and his tiger cubs Stephen Mandel and Chase Coleman are the most bullish fund managers about Google. We should note that Chase Coleman has an excellent track record of picking winners in the internet space and he made more than $1 billion for his investors by betting on Facebook in its infancy (check out Chase Coleman’s other internet stocks).
3. El Paso Corp (EP) is the third most popular stock among billionaire hedge fund managers. Carl Icahn made a bundle in EP by investing more than a $1 billion before its merger with Kinder Morgan was announced. He had $1.9 billion invested in the stock at the end of December. The other fund managers were pursing El Paso as a merger arbitrage candidate. These stocks usually trade at a discount to their announced merger price because investors usually aren’t 100% certain that the merger will go through as planned. Billionaire hedge fund managers made 9.6% since the beginning of this year by correctly betting that El Paso – Kinder Morgan deal will go through.
4. News Corp (NWSA) is the fourth popular stock among billionaire hedge fund managers. When other investors were dumping News Corp shares because of the hacking scandal billionaire hedge fund managers were buying them. The stock recovered all of its loses last summer. It is also slightly outperforming the market this year. Paul Singer had the largest position in NWSA among the billionaires we are tracking.
5. Medco Health Solutions (MHS) is the fifth popular stock. This is also a merger arbitrage play. The stock returned 25.7% this year as of March 16. D. E. Shaw had more than $300 million invested in the stock.
6. Microsoft (MSFT) is the sixth most popular stock among billionaire hedge fund managers. Ken Fisher and David Einhorn had the largest stakes in the stock. Last May at the Ira Sohn Conference David Einhorn called for the resignation of Steve Ballmer and stated that Microsoft is significantly undervalued. The stock gained 38% since then (read the transcript of Einhorn’s presentation).
7. Wells Fargo (WFC) is the seventh most popular stock among billionaire fund managers. The stock’s 2012 gains are around 23.4%, ten percentage points more than the S&P 500 index. Warren Buffett has the largest stake in this banking giant at the end of December. There were 9 other billionaire fund managers with Wells Fargo positions.
Insider Monkey has 30 stocks in its Billionaire Hedge Fund Manager Index and these 30 stocks (see the entire list here) had an average return of more than 16% this year as of March 16. The top 7 stocks that we discussed above performed even better. Five of these seven stocks outperformed the market and they had an average return of 19.9%, vs. 12.3% for the SPY. It is too early to turn this into a trading strategy, but tracking this index is going to be more fun than tracking billionaires’ wealth every 15 minutes.

10 Most Popular Stocks Among Hedge Funds

Posted on 29. Feb, 2012 by .

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Guest Post By: Insider Monkey

 

We have been tracking the most popular stocks among hedge funds for more than a year now. Hedge funds are known to be short-term oriented but when we look at the most popular stocks among hedge funds we see that they are focused on the long-term more than expected. Apple (AAPL) and Microsoft (MSFT) have been among the top three most popular stocks since at least the end of 2010 (see the 10 most popular stocks at the end of September). This is consistency and both stocks outperformed the market over the last year.  For the past two quarters Google (GOOG) joined them. Even George Soros bet more than $150 million on the stock. We are bullish about Google as well. In fact mega-cap technology stocks are trading at very low forward price multiples compared to the market. Apple will probably make around $40 per share in 2012. The stock has more than $100 per share in net cash, so its 2012 price-earnings ratio is a paltry 10 excluding cash. This is a stock that is expected to increase its earnings by nearly 20% for the next 5 years. On the other hand utility stocks that are expected to grow at less than 5% annually have P/E ratios around 13-14.

Hedge funds’ message cannot be clearer. Technology stocks are undervalued and sooner or later the rest of the market will recognize this. Hedge funds are also buying mega-cap banks. Citigroup (C) is the most popular financial stock followed by Bank of America (BAC) and JP Morgan (JPM). Warren Buffett’s favorite Wells Fargo (WFC) is the fourth most popular bank and ranks ninth overall. Another stock that is trading at a ridiculously low multiple is David Einhorn’s favorite General Motors (GM). For the past 10 years hedge funds’ top 10 stock picks managed to beat the market by around 2 percentage points annually. It isn’t too much but it sure is better to buy these stocks in your IRA account than an index fund. Check out the rest of the list yourself. This list is based on the fourth quarter 13F filings of 375 hedge funds and prominent stock pickers followed by Insider Monkey. Here are the 10 most popular stocks among hedge funds:

1. Apple: 127 hedge funds, $16 billion

2. Google: 108 hedge funds, $10.9 billion

3. Microsoft: 95 hedge funds, $6 billion

4. Citigroup: 92 hedge funds, $4.8 billion

5. Bank of America: 85 hedge funds, $2.3 billion

6. General Motors: 80 hedge funds, $2.2 billion

7. JP Morgan: 79 hedge funds, $4.6 billion

8. Pfizer (PFE): 69 hedge funds, $3.5 billion

9. Wells Fargo: 68 hedge funds, $15.3 billion

10. Qualcomm (QCOM): 64 hedge funds, $4.1 billion

via 10 Most Popular Stocks Among Hedge Funds.

Obama Talks to Buffett About Economy

Posted on 23. Aug, 2011 by .

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President Barack Obama, preparing for a post-Labor Day speech with plans for stimulating the economy, talked with billionaire Warren Buffett about how to boost job creation and spur growth.

“The president and Mr. Buffett discussed the overall outlook on the economy and the reaction to the headwinds we’ve experienced over the last couple of months,” said Josh Earnest, an administration spokesman. “They talked a little bit about some possible measures that would spur investment and increase economic growth and they also talked about some measures that could address the long-term fiscal situation in this country.”

Obama placed the call yesterday to the chairman and chief executive officer of Berkshire Hathaway Inc. (BRK/A), who has served as an informal adviser to the president, Earnest said. The president also talked with Ford Motor Co. Chief Executive Officer Alan Mulally about developments in the automotive and manufacturing sectors of the economy.

Obama plans to give an address on the economy shortly after the U.S. Labor Day holiday, which is Sept. 5. In conjunction with actions to shrink the nation’s long-term deficit, Obama is considering steps to give a quick boost to employment, including an expanded infrastructure spending program, tax incentives for hiring workers, a cut in the payroll tax paid by employers and worker retraining programs.

Republican Opposition

Any measures to spur the economy that require additional government spending are likely to run into opposition from congressional Republicans, who control the House of Representatives.

One idea that has aroused interest among the president’s advisers is a Georgia program that lets workers receiving unemployment insurance train for jobs at businesses at no cost to the employer, said a person familiar with deliberations.

At a town-hall meeting last week in Atkinson, Illinois, Obama praised the Georgia initiative as “a smart program.” The Georgia Works program lets jobless workers continue to collect unemployment insurance while a new employer trains them on the job for eight weeks. After what amounts to a no-cost trial period for a potential new employee, the company may hire or pass on the person.

“You’re essentially earning a salary and getting your foot in the door into that company,” Obama said. “If they hire you full-time, then the unemployment insurance is used to subsidize you getting trained and getting a job.”

Full article available @:

http://finance.yahoo.com/news/Obama-Talks-to-Buffett-About-bloomberg-2103488222.html?x=0&sec=topStories&pos=9&asset=&ccode=

BUFFETT CALLS FOR HIGHER TAXES

Posted on 15. Aug, 2011 by .

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Buffett calls for higher taxes on US Super Rich

The wealthiest Americans should pay more income tax and make sacrifice to bring the Nation’s fiscal house in order, Warren Buffett, chairman of Berkshire Hathaway, said Monday.

“While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we Mega-Rich continue to get our extraordinary tax breaks,” Mr. Buffett said in an article carried on Monday’s The New York Times.

Mr. Buffett noted that he paid 17.4% of his taxable income for the federal income and payroll taxes last year, and the rate is even lower than the other 20 staff members working in his office.

With the Nation’s debt surging to an unsustainable level, experts charged that the Super Rich Americans did not make enough sacrifice for the Nation’s austerity efforts, as many of them are allowed to classify the major chunk of their income as “carried interest” and get a bargain 15% tax rate.

Back in the 1980’s and 1990’s, tax rates for the rich Americans were higher, he mentioned in the article entitled “Stop Coddling the Super-Rich”.

In Y 1992, the Top 400 wealthiest Americans had aggregate taxable income of US$16.9-B and paid federal taxes of 29.2% on that sum. But, in Y 2008, the aggregate income of the highest 400 soared to US$90.9-B, but the rate paid had fallen to 21.5%, he said.

“My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice,” Buffett said.

Paul A. Ebeling,

 

 

 

 

Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster’s Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.

Buffett Ready To Bid Debt Ceiling Adieu

Posted on 19. Jul, 2011 by .

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Provided by Yahoo! Finance

 

Legendary investor Warren Buffett said the U.S. should do away with the debt ceiling, the issue that has recently roiled global equity markets as speculation has intensified that if Congress does not raise the debt ceiling, the “AAA” credit rating held by the U.S. for almost 90 years could be in danger. Buffett wasn’t the first to float the idea of nixing the debt ceiling. Moody’s Investors Service’s did the same in a report published on Monday.

Buffett’s Berkshire Hathaway is exposed to the U.S. economy through its equity investments, so it’s not surprising Buffett would like to see a practical, common-sense resolution to the debt ceiling issue. At the end of the first quarter, Berkshire held equity stakes in Dow components American Express (NYSE:AXP – News), General Electric (NYSE:GE – News), Kraft Foods (NYSE:KFT – News), Coca-Cola (NYSE:KO – News) and Johnson & Johnson (NYSE:JNJ – News) among others.

Full article @:   http://finance.yahoo.com/news/Buffett-Ready-To-Bid-Debt-indie-60127339.html?x=0

Buffett Says ‘Bet Heavily’ Against Double Recession -Bloomberg

Posted on 13. Jul, 2011 by .

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Buffett Says ‘Bet Heavily’ Against Double Recession

    • (Bloomberg) — Warren Buffett, chief executive officer of Berkshire Hathaway Inc., talks about the debt ceiling debate and the U.S. economy.     Buffett, speaking with Betty Liu on Bloomberg Television’s “In the Loop,” also discusses his views on acquisitions, the labor market and Todd Combs. (Source: Bloomberg)

 

I pay a lot of attention to what Buffett says about the economy because he is the most connected man in America.  If you look at an interlocking network diagram of corporate boards, all roads lead back to Warren Buffett.  There’s little that goes on in the U.Sbusiness world, that he doesn’t have eyes and ears reporting back to him if he wants them.

Warren Buffett’s Portfolio – Shocking Truth About How He Trades Options

Posted on 26. May, 2011 by .

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By Kirk Du Plessis

I’ve told people for years and years that Warren Buffett’s portfolio and Berkshire Hathaway company publicly discloses that they are naked put option sellers. More specifically they sell index put options, the exact same strategy we use here at Option Alpha.

Why Is This So Shocking?

Honestly I always get a weird response when I tell people this. Why is it so shocking to think that one of the best investors of all time my use the same strategy that I prefer. Well, I guess I’m using his strategy and not the other way around right? I’ll give credit where credit is due.

But the truth is that he’s done it if years and will continue to do so…you need to start doing this right now too.

Do What Billionaires Do!

I’ve always believe that if I want to become a better trader, I have to invest like millionaires and billionaires. What better way to do that then to read the public filings of their companies! Sure it may take some time to get through but I set aside time each month to read these public filings.

Don’t you think that if the richest man in the world is selling index put options, you should be doing the exact same thing? I do.

Read The Proof Yourself…

To prove that Warren Buffett and Berkshire Hathaway use the same option strategy, we have provided direct quotes from the 2010 annual report per the SEC filings. I urge you to check me on these and see what they say for yourself! Download the 181 Page 10-K filing here.

Page 19

Our risks of losses under equity index put option contracts are based on declines in equity prices of stocks comprising certain major stock indexes worldwide. Although the contracts currently in-force do not begin to expire until 2018, we could be subject to significant future settlement payments at expiration if equity index prices are below the strike prices specified in the contracts.

Page 44

In 2010 and 2009, gains on equity index put option contracts were $172 million and $2.7 billion, respectively. Under many of the contracts, no settlements will occur until the contract expiration dates, many years from now.

Page 79

The equity index put option contracts are European style options written on four major equity indexes. Future payments, if any, under these contracts will be required if the underlying index value is below the strike price at the contract expiration dates which occur between June 2018 and January 2026. We received the premiums on these contracts in full at the contract inception dates and therefore we have no counterparty credit risk.

As of December 31st 2010, Warren held the following portfolio of 25 stocks…

By Kirk Du Plessis

Market may have further to go on the downside

Posted on 23. May, 2011 by .

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Bearish chart

 The S & P 500 closed down 1.19% Monday on any number of growing anxieties.  We are oversold on a short-term basis but the RSI line is picking up momentum on the way down.  Not good.  Besides the 50 day moving average has been convincingly broken. 

Berkshire Hathway is negative for the yearInteresting enough Berkshire Hathaway stock is now down for the year. It kind of looks like my broken position in Wells Fargo which is also one of BRK.A’s largest positions. The last year Buffett’s Berkshire Hathaway was negative and the S&p 500 had positive returns was 1999.   There was also massive Internet mania going on that year and 2000 marked a historic top.    That year Berkshire was down 19.9% versus a positive 19.5% change in the S&P.

Wells Fargo- How to Rob the Bank

Posted on 03. May, 2011 by .

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I originally alerted readers of the Sax Angle to a profitable trading opportunity on Wells Fargo stock.  See Two new insider buys today piqued my interest for the details of that post.  Since then we have nearly doubled our money on two options we purchased, the June 30 calls and the May 30 calls.  Both options looked cheap and after today’s move in Wells Fargo, they look even cheaper.  What we mean by that although the options are nearly twice the price, the chart of Wells Fargo is far more bullish than it was when we first invested.  Needless to say, we did not sell and actually are buying more.  We first noticed Wells Fargo after the new CFO picked up 10,000 shares following its recent earnings report.  When we bought it the stock was oversold and the technical picture hadn’t set up so well.  It now looks much stronger.

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Warren Buffett’s Wise Words On Business, Money, Philanthropy, Debt & Wealth Disparities

Posted on 21. Apr, 2011 by .

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Recently Discovered Video Interview with Seth Klarman

Posted on 28. Mar, 2011 by .

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For those who don’t know Seth Klarman, here’s some brief info from Jacob Wolinsky at Valuewalk:

Seth Klarman is undoubately one of the greatest investors of our time. Klarman manages Baupost Group, the 11th largest Hedge Fund in the US, with over $20 billion in assets.  There is a rumor that Buffett, (a big fan of Klarman) keeps a copy of Klarman’s out of print and super expensive book Margin of Safety, by his bed. Seth Klarman’s Baupost fund has produced returns of approximately 20% annually since inception in 1983. Klarman has produced phenomenal returns despite the fact that he usually holds huge amounts of cash.

According to a lecture given by Bruce Greenwald: Warren Buffett says that when he retires, there are three people he would like to manage his money. First is Seth Klarman of the Baupost Group, who you will hear from later in the course. Next is Greg Alexander. Third is Li Lu.

Below are the videos (6 in total), enjoy:

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