Warren Buffett Can’t Stop Buying These Shares, Plus the Latest Moves of David Abrams and Nathaniel August

With the holidays behind us, a new wave of filings has been set off, revealing hedge funds’ latest moves. Let’s forget about China and the falling oil prices for a moment and see what the hedge fund heavyweights have busied themselves with. In this article we’ll take a look at a stock Warren Buffett has an insatiable appetite for as well as what was on the shopping list of David Abrams and Nathaniel August.

Imitating hedge funds and other institutional investors can help identify some of the most profitable stocks on the market. However, our extensive research that covered the period between 1999 and 2012, showed that the best approach is to follow these investors into their small-cap stocks. Our backtests showed that the 15 most popular small-cap stocks among hedge funds managed to generate a monthly alpha of 81 basis points, versus an alpha of 0.7 percentage points posted by their top 50 large-cap picks (see more details here).

David Abrams seems to feel good about college bookstores, having recently boosted his investment in Barnes & Noble Education Inc (NYSE:BNED). According to a filing with the Securities and Exchange Commission, his fund, Abrams Capital Management, has acquired 488,348 shares of Barnes & Noble, at prices between $8.73 and $8.94 per unit. Following these transactions, the fund holds 8.71 million shares which represent approximately 18% of the company’s outstanding shares.

A former colleague of value investor Seth Klarman, Abrams started his fund in 1999 and had more than $8 billion in assets under management at the end of 2013. His equity portfolio carried a market value of $1.4 billion at the end of 2015’s third quarter, with more than half of that represented by tech stocks, while financial stocks accounted for roughly 20%. The Western Union Company (NYSE:WU) is his biggest bet, with Abrams Capital holding 21.6 million shares, while Microsoft Corporation (NASDAQ:MSFT) is just behind that, with Abrams owning 4.98 million shares. Both positions were unchanged during the quarter.

On the next page we’ll look at the energy company Nathaniel August is so interested in and talk about Buffett’s latest play.

Nathaniel August is still bullish on SunCoke Energy Inc (NYSE:SXC), having further increased his stake recently. He initiated the investment during the third quarter, amassing 1.78 million shares by the end of September. According to a recent Form 4 filing with the SEC, his fund, Mangrove Partners, now holds 6.67 million shares or 10.4% of the company’s common stock, having acquired 45,100 shares on Tuesday.

August is also interested in Asta Funding, Inc. (NASDAQ:ASFI), having reported several transactions involving that stock since the start of the year. According to its latest 13G filing, Mangrove Partners holds 1.49 million shares of the stock, up by 25% from the amount reported in its latest 13F filing. At the end of the third quarter Mangrove’s biggest bet was Hudson City Bancorp, Inc. (NASDAQ:HCBK), a bank holding company that recently merged with M&T Bank Corporation (NYSE:MTB). Several other financial stocks can be found among Mangrove Partners’ top holdings, as 36% of its portfolio is invested in the financial sector.

According to its latest Form 4 filing, Warren Buffett’s Berkshire Hathaway acquired 902,442 shares of Phillips 66 (NYSE:PSX) on Monday at prices varying between $74.41 and $77.50 per unit, lifting its investment to more than 66.5 million shares. As a result, Buffett now holds roughly 12.4% of the company’s common stock. Phillips 66 is a spinoff from ConocoPhillips (NYSE:COP) that operates chemicals and oil refining businesses.

The Wizard of Omaha is still relying heavily on Wells Fargo & Co (NYSE:WFC), with Berkshire Hathaway holding more than 470 million shares of the banking company. The most notable additions made by Buffett during the third quarter are the above-mentioned Phillips 66 (NYSE:PSX) and Kraft Heinz Co (NASDAQ:KHC), both making it to the investors’ top-ten holdings. According to its latest 13F filing, Berkshire held 325 million shares of Kraft Heinz, a company “created” by Buffett. Together with 3G Capital, Buffett took Heinz private in 2013 in a deal worth $23 billion. Last year, the company merged with Kraft Foods, thus creating Kraft Heinz, an $86 billion behemoth.

Disclosure: None