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 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

Burger Kings: The 10 Most Expensive Burgers in the World

The 10 Most Ethnically Diverse Countries in the World

The 10 Most Exclusive Credit Cards in the World

The 10 Most Expensive Cruise Ships in the World

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!