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Berkshire Hathaway Inc. (BRK.A), The Coca-Cola Company (KO): Five Stocks Warren Buffett and Insiders Are Bullish About

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Editor’s Note: Related tickers: Berkshire Hathaway Inc. (NYSE:BRK.A), The Coca-Cola Company (NYSE:KO), General Motors Company (NYSE:GM), M&T Bank Corporation (NYSE:MTB), National-Oilwell Varco, Inc. (NYSE:NOV), Mondelez International Inc (NASDAQ:MDLZ).

We track quarterly 13F filings from hundreds of hedge funds and other notable investors, including Warren Buffett’s holding company Berkshire Hathaway Inc. (NYSE:BRK.A). One use of this information is in developing investment strategies; we have found that the most popular small cap stocks among hedge funds generate an average excess return of 18 percentage points per year, and we think that more techniques are possible as well. It’s also possible to go through individual managers’ filings in search of stocks which meet certain criteria, including stocks recently bought by company insiders. We have gone through Berkshire Hathaway Inc. (NYSE:BRK.A)’s most recent 13F filing and here are its five largest holdings which at least one insider has bought in the last three months:

hedge fund research

Longtime Buffett favorite The Coca-Cola Company (NYSE:KO) had an insider purchase a small number of shares in March at an average price of $39.16 per share; Berkshire Hathaway Inc. (NYSE:BRK.A) owned 400 million shares of the soft drink company at the end of the quarter. High demand for safe investments (The Coca-Cola Company (NYSE:KO) makes for a good defensive pick, with a beta of 0.4 and a dividend yield close to 3%) has driven up the stock quite a bit from our perspective- it is currently valued at over 20 times trailing earnings, even with net income slipping last quarter compared to the first quarter of 2012. As a result we’re not particularly excited about The Coca-Cola Company (NYSE:KO).

A vice president at General Motors Company (NYSE:GM) was buying the stock in early May at an average price of $31.92 per share. Buffett, meanwhile, maintained a stake of 25 million shares through Q1. Many value investors have been buying into General Motors Company (NYSE:GM), arguing that an aging U.S. consumer auto fleet is setting automakers up for a turnaround. Wall Street analysts are bullish on General Motors Company (NYSE:GM), with their earnings forecasts placing the current stock price at a forward P/E of 8 and a five-year PEG ratio of 0.6. However, as with The Coca-Cola Company (NYSE:KO) the company’s financials have been slipping and so we’d be cautious despite these attractive valuation metrics.

M&T Bank Corporation (NYSE:MTB), a $13 billion market cap bank focused on the mid-Atlantic region of the U.S., was another pick common between Berkshire and an insider (who bought 1,250 shares in March for over $104 per share).
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