Our research shows that the most popular small cap stocks among hedge funds (as determined by quarterly 13F filings) outperform the S&P 500 by 18 percentage points per year, proving that 13Fs can be useful for investors. In fact, our own portfolio tracking these small caps beat the market by 33 percentage points since inception last summer. Learn more about our small cap strategy. We can also make use of our database of 13Fs by checking out the favorite stocks of individual managers such as Warren Buffett of Berkshire Hathaway (here are Buffett’s latest stock picks) or the dozens of hedge fund managers who have become billionaires through their success. Here is our quick take on the six stocks in Berkshire’s portfolio at the end of June (and it likely still owns most of these given Buffett’s attitude as a long term investor) which the largest number of billionaire managers we track reported owning as well:
Buffett and his team had 40 million shares of General Motors Company (NYSE:GM) in their portfolio at the end of the second quarter of the year, and 17 billionaires in our database liked the automaker as well. In fact, among all the filers we track General Motors Company (NYSE:GM) was the fourth most popular stock (see the full top ten list). General Motors Company (NYSE:GM) trades at 13 times trailing earnings, but recent U.S. auto sales numbers have been up and some bulls have suggested that the industry is poised for recovery as consumers are forced to replace their aging current vehicles. Wall Street analyst expectations imply a forward P/E of 8 and a five-year PEG ratio of 0.6.
Next on our list, with 13 billionaires long the stock, is Visa Inc (NYSE:V). Credit card stocks have been a favorite of “Tiger Cub” fund managers in particular; billionaire Andreas Halvorsen’s Viking Global reported a position of 2.4 million shares in Visa (find Halvorsen’s favorite stocks). The company’s revenue was up 17% in its most recent quarter compared to the same period in the previous fiscal year. However, markets have already priced in quite a bit of future growth at the company, and so the trailing P/E is 21. Still, growth is high enough that we’d be interested in comparing Visa to its peers.
Berkshire initiated a small position in DISH Network Corp (NASDAQ:DISH) last quarter. Other successful investors who like the stock include billionaire Leon Cooperman of Omega Advisors (research more stocks Omega owns). While Dish is priced quite expensively in terms of its trailing earnings, its valuation on a cash flow basis is more reasonable with a trailing EV/EBITDA multiple of 8.5x. However, at this price it is still dependent on future growth and recent results have not been good with revenue about flat in the second quarter of 2013 versus a year earlier. Adjusted earnings per share were actually slightly negative, and well below expectations.
One of Buffett’s five largest holdings was The Procter & Gamble Company (NYSE:PG), disclosing ownership of over 50 million shares in the 13F. Profits were down at the company in its fiscal Q4 (which ended in June) compared to a year ago though the sell-side expects business to recover somewhat over the next several quarters (making for a forward P/E of 17). With a beta of 0.3 and a dividend yield of 3.1%, The Procter & Gamble Company (NYSE:PG) is a potential defensive pick. Pershing Square, managed by billionaire Bill Ackman, has been another major shareholder in The Procter & Gamble Company (NYSE:PG) (check out more stocks Ackman likes).
12 billionaires reported positions in Mastercard Inc (NYSE:MA), making that stock the fifth on our list as Berkshire had 405,000 shares in its own portfolio. Similarly to its peer the stock is fairly expensive in terms of earnings, with trailing and forward P/Es of 26 and 21 respectively. Last quarter Mastercard did manage double-digit growth rates on both top and bottom lines, however, and so it might be worth keeping an eye on in any case (though some credit card companies do appear cheaper). As with Visa, Tiger Cub funds love Mastercard- including Tiger Global Management, which counts billionaire Chase Coleman among its managers.
Finishing off our list is $55 billion market cap global snack foods company Mondelez International Inc (NASDAQ:MDLZ), formed from the breakup of Kraft Foods. Billionaire Nelson Peltz’s Trian Partners has taken a large position in the company, hoping to create a merger with PepsiCo, Inc. (NYSE:PEP) (check out more of Trian’s picks). Mondelez is valued at 18 times forward earnings estimates; many food stocks have been trading at fairly high earnings multiples following M&A interest in the industry and Buffett’s own acquisition of Heinz.
Disclosure: I own no shares of any stocks mentioned in this article.
