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)

Comments
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

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

Top 10 Highest Paying Jobs in the World

Most Expensive Day-Care in New York City

The 10 Cheapest Places to Retire Abroad

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!