Warren Buffett and Ken Fisher aren’t hedge fund managers, but their investing success (Buffett at holding company Berkshire Hathaway and Fisher at mutual fund Fisher Asset Management) has made them billionaires and has allowed them to build up a following in the investment community. Both Berkshire and Fisher file quarterly 13Fs, disclosing many of their long equity positions. Check out stock picks from Warren Buffett and from Ken Fisher. We have gone through both of these investors’ filings and here is our quick take on three stocks that both Buffett and Fisher’s Fisher Asset Management both had in their ten largest stock positions by market value:
International Business Machines Corp. (NYSE:IBM) was actually one of both managers’ top five stock picks. Berkshire’s stake increased slightly, coming in at almost 68 million shares, while Fisher’s holdings grew 48% to a total of 3.3 million shares. IBM gets more of its business from software and services than peers such as Dell Inc. (NASDAQ:DELL), and as a result has been more immune to weakening hardware demand: while Dell’s earnings fell by nearly half last quarter compared to the same period in 2011, IBM’s net income was essentially unchanged. As a result, Dell’s share price has fallen 40% in the last year while IBM is flat (both companies have underperformed a rising market). Dell gets talked about as a possible value stock at 7 times trailing earnings, but IBM’s P/E of 14 isn’t that high either and the company seems like a considerably safer investment. IBM is far from a screaming buy- there’s still a chance that the hardware business could drag the company down- but we still think that it’s worth considering as a value stock.
Both of these investors also liked American Express Company (NYSE:AXP), as Buffett held his position about constant while Fisher reported a 75% increase in the size of its position. At a market cap of about $63 billion, the credit and charge card issuer trades at 13 times trailing earnings. Its revenue and earnings were about flat last quarter compared to the third quarter of 2011. We like its brand name, though we’re worried at the fact that it doesn’t seem to be growing as rapidly as some other credit card companies. The earnings multiples are interesting- trailing and forward P/Es of 13 and 12, respectively- but we’re not sure that the stock is a better buy than the even cheaper Discover and Capital One.
Buffett is famously a major investor in Wells Fargo & Company (NYSE:WFC), and Berkshire actually bought shares during the third quarter and owned over 420 million shares according to its 13F filing. As with American Express, Fisher substantially increased its position in this Buffett favorite and it is now that fund’s favorite “big bank” as well. Wells Fargo has lagged other banks like Citigroup Inc. (NYSE:C) and Bank of America over the last several months, and as a result now looks close to competitive. It still trades at a premium to the book value of its equity while Citi, for example, carries a P/B ratio of only 0.5. Yet in terms of earnings the spread between these two banks’ valuations narrows considerably as Wells Fargo proves more efficient in using its assets: Wells Fargo trades at 9 times consensus earnings for 2013, while Citigroup’s forward P/E is a bit above 7. With Wells increasing its revenue and earnings at a double-digit rate last quarter versus a year earlier, while Citi’s revenue and earnings both fell by over 30%, we can see an argument for Wells Fargo being a more attractive investment. Both Citigroup and Wells Fargo made our list of the most popular stocks among hedge funds for the third quarter of 2012 (see the full rankings).
