Hedge funds and other major investors are required to publicly file 13F filings within six to seven weeks after the end of a quarter. This provides the investing public with a relatively in-depth view of what a fund owns, though the picks are somewhat stale. While it isn’t a good idea to blindly follow any fund, we think that these filings can be a good source of free investment ideas from money managers that retail investors can then go on to research if they like what they see. Gardner Russo & Gardner, much of whose capital is managed by Tom Russo, has already filed its 13F for the end of December. Read on for our quick take on five of the fund’s top stock picks for 2013 and compare them to previous filings.
Gardner Russo & Gardner’s top stock pick was Berkshire Hathaway Inc. (NYSE:BRK.B), with about 4,600 of the holding company’s Class A shares and a large position in the Class B shares as well. Apparently Russo is confident enough in Warren Buffett’s investing prowess that he feels that Berkshire should have a prime place in any true value investor’s portfolio (see Buffett's stock picks). Berkshire Hathaway trades at a premium to the book value of its equity, with a P/B ratio of 1.3. Our primary concern about the company concerns whether Buffett’s successors will be able to perform at a similar level.
Philip Morris International Inc. (NYSE:PM) was another top pick as the fund owned about 8 million shares at the beginning of 2013, up from 7.7 million shares three months earlier. The cigarette company pays a dividend yield of almost 4%, and has an excellent record of paying dividends over time. The stock trades at 15 times consensus earnings for 2013. Billionaire Ken Fisher’s Fisher Asset Management added shares of Philip Morris to its portfolio in the third quarter of 2012 and closed September with a position of 5.4 million shares (check out more stocks Fisher was buying). We think that it and other cigarette companies are worthwhile options for income investors.
Three more stock picks, including a Buffett favorite: