Stay Away From These Warren Buffett Stocks

In looking through the historical 13F filings of Warren Buffett’s Berkshire Hathaway, we calculate that his mid-cap stock picks (those with market caps between $10 and $20 billion) returned 0.37% per month between 1999 and 2012. This is modestly higher than the 0.30% monthly total return for the S&P 500 during the same time period but, if adjusted for risk using Carhart’s four factor model, we calculate his picks generated 25 basis points of negative alpha on a monthly basis. Using the same methodology for the period between 2008 and 2012, Buffett’s mid-cap stock picks performed better, generating monthly alpha of positive 6 basis points. In general, our research indicates that hedge funds, or any other investor, for that matter, can’t generate enough outperformance to justify their high fees when it comes to large-cap or mid-cap stocks. Our research also shows that Warren Buffett is a phenomenal stock picker in smaller-cap stocks. We believe investors can generate better returns if they avoid Buffett’s mid-cap picks and focus on his smaller-cap stocks. By using a similar approach Insider Monkey’s small-cap hedge fund strategy returned 88% since the end of August 2012 and outperformed the market by nearly 50 percentage points (see the details here). Now, we will take a closer look at Buffett’s top 5 mid cap picks.

DaVita HealthCare Partners Inc. (NYSE:DVA) is Buffett’s largest mid-cap stock position, with his 36.5 million shares valued at $2 billion making him the largest shareholder. He increased his stake in the provider of kidney dialysis services by 16% during the fourth quarter of 2013. Other hedge fund managers that are long the stock include Stephen Mandel of Long Pine Capital, David Shaw of D E Shaw and Alan Fournier of Pennant Capital Management.

Second on the list is Moody’s Corp. (NYSE:MCO), in which Buffett owns 24.7 million shares worth $2 billion. Similar to many of his investments, Buffett is the largest shareholder in the credit rating agency. Chris Hohn of Childrens Investment Fund, John Armitrage of Egerton Capital Limited and Charles Akre of Akre Capital Management are other hedge fund managers bullish on the stock.

Warren Buffett

Buffett’s 5.3 million class A shares of Starz (NASDAQ:STRZA) make up his third largest mid-cap stock holding, valued at approximately $775 million. He is the fourth largest shareholder of the integrated media and entertainment company, which was spun-off from Liberty Media Corp (NASDAQ:LMCA) in January 2013. Other hedge fund managers who like the stock include Murray Stahl of Horizon Asset Management, Jeffrey Gates of Gates Capital Management and Steven Cohen of SAC Capital Advisors.

M&T Bank Corp. (NYSE:MTB) is Berkshire’s fourth largest mid-cap stock, whose 5.4 million shares are worth $627 million. Buffett has been a long-term investor in the regional bank, with his stake making him its sixth largest shareholder. Other investors among the funds we track include Jean-Marie Eveillard of First Eagle Investment Management, John Paulson of Paulson & Co. and Cliff Asness of AQR Capital Management.

Rounding out his mid-cap list is Verisk Analytics Inc. (NASDAQ:VRSK), in which Buffett owns 1.6 million shares valued at $103 million. Verisk is a $10 billion market cap company providing proprietary data, analytic methods, and embedded decision support solutions for detecting fraud in property and casualty (P&C) insurance, financial, and healthcare industries in the U.S. Other hedge funds owning the stock include Jim Simons of Renaissance Technologies, Panayotis Takis Sparaggis of Alkeon Capital Management and Charles Akre of Akre Capital Management.

Disclosure: none

Recommended Reading:

Two Healthcare Companies That Insiders Have Bought Recently

Two Oil-Related Services Stocks With Multiple Insider Purchases

Insiders Buy Shares of Methode Electronics Inc. (MEI) & Kratos Defense & Security Solutions, Inc (KTOS)

blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 44 percentage points in 21 months Learn how!

Lists

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

Top 10 Jobs for 2014 by Salary Gain (Predictions)

Top 5 Digital Trends for 2014

Top 6 Things You Can Do To Increase Your Productivity

Top 9 Trending Smartphones in 2013

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!