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)

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
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

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

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 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!