Warren Buffett and Lou Simpson Are Bullish On These Stocks

Lou Simpson, a former understudy of Warren Buffett, is the manager of SQ Advisors. Simpson has enjoyed great success running GEICO, returning an average of 24% annually. Following the takeover of GEICO by Berkshire Hathaway, Simpson stayed to work under Buffett managing approximately $4 billion worth of stock investments. In 2011 he started his own fund, SQ Advisors, managing to raise approximately $1.3 billion. Like his former boss, Simpson is an advocate for value investing, basing his decisions on his own research and analysis of the company and industry in question.

hedge funds vs. mutual funds

The similarities between the two great investors can be seen in their current stock holdings as well. Both Berkshire Hathaway and SQ Advisors hold impressive stakes in companies like Wells Fargo & Co (NYSE:WFC) and Moody’s Corporation (NYSE:MCO). Let us have a closer look at Simpson’s top stock picks!

Top dog is United Parcel Service, Inc. (NYSE:UPS). During the fourth quarter of 2013, Simpson has increased his fund’s position by 8%. SQ now holds 2.37 million shares worth approximately $250 million. United Parcel Service has a market cap of $89 billion and pays an annual dividend of $2.53 which represents a yield of 2.6%. The stock is traded at a Price to Earnings (P/E) ratio of 21.06, well below the industry average of 51.30. For the fourth quarter of 2013, UPS posted revenues of $14.9 billion and earnings per share (EPS) of $1.25. For the current quarter, the market expects UPS to register revenues of $13.9 billion and EPS of $1.13.

Simpson is also bullish on Wells Fargo & Co (NYSE:WFC), which is Warren Buffett’s biggest position at the moment. According to SQ Advisors’ latest 13F report, Simpson has increased his investment by 10% to 4.8 million shares, valued at $218 million. Following the massive fall in the price of the stock generated by the 2008 financial crisis, Wells Fargo has been constantly advancing to a current price of $47.08 per share. The company has a market cap of $247 billion and pays an annual dividend of $1.20 – a yield of 2.6%. Wells Fargo posted revenues of $21.7 billion and earnings of $1 per diluted share for the three months ending December 31, 2013. Revenue and EPS are expected to fall during the current quarter to $20.6 billion and $0.96 respectively.

Next up is Moody’s Corporation (NYSE:MCO). Simpson has made only a minor adjustment, adding around 600 shares during the last quarter, while Buffett has decreased his exposure by 1%. SQ now holds a little over 2 million shares worth around $157 million. Moody’s Corporation has also been in an uptrend since the credit crunch and is currently traded at approximately $82 per share. The company has a market cap of $17.49 billion and pays an annual dividend of $0.98, which represents a yield of 1.20%. The company’s latest financial report revealed revenues of $779 million and EPS of $0.94 for Q4 of 2013. It is expected to replicate the same performance in the current quarter, with the market predicting revenues of $772 million and earnings of $0.92 per share.

Simpson has high hopes for U.S. Bancorp (NYSE:USB) as well. During the fourth quarter of last year, SQ Advisors doubled its position to 3.89 million shares valued at $157 million. The company has a market cap of $75.8 billion and pays an annual dividend of $0.89. The stock trades at a trailing P/E ratio of 13.xx, basically in line with the industry average. For the last quarter of 2013, U.S. Bancorp posted revenues of $5.22 billion and earnings per diluted share of $0.76. Analysts expect the company to register revenues of $4.82 billion and EPS of $0.73 for the three months of 2014.

Last but not least is DIRECTV (NASDAQ:DTV). Simpson has almost halved his fund’s stake in the company to 1.66 million shares worth approximately $115 million. However, Berkshire The company has a market cap of $39.7 billion and does not pay a dividend. The stock trades at a P/E ratio of 15.06 and has a beta of 1.13. For the three months ending December 31, 2013, DIRECTV posted revenues of $8.6 billion and earnings of $1.53 per diluted share. Expectations for the current quarter are as follows: revenues of $7.9 billion and EPS of $1.52.

Disclosure: none.

Recommended reading:

Becker Drapkin Management Increases Its Holding of Cascade Microtech, Inc. (CSCD)

Kevin Kotler’s Broadfin Capital Reports New Stake In MELA Sciences Inc (MELA)

Springbok Capital’s Top Picks: General Motors Company (GM) and Constellium NV (CSTM)

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 Click to see monthly returns in table format!

Lists

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools 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!