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Warren Buffett & His Billionaire Buddies Going Bonkers On General Motors Company (GM), Visa Inc (V)

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Our research shows that the most popular small cap stocks among hedge funds (as determined by quarterly 13F filings) outperform the S&P 500 by 18 percentage points per year, proving that 13Fs can be useful for investors. In fact, our own portfolio tracking these small caps beat the market by 33 percentage points since inception last summer. Learn more about our small cap strategy. We can also make use of our database of 13Fs by checking out the favorite stocks of individual managers such as Warren Buffett of Berkshire Hathaway (here are Buffett’s latest stock picks) or the dozens of hedge fund managers who have become billionaires through their success. Here is our quick take on the six stocks in Berkshire’s portfolio at the end of June (and it likely still owns most of these given Buffett’s attitude as a long term investor) which the largest number of billionaire managers we track reported owning as well:

Buffett and his team had 40 million shares of General Motors Company (NYSE:GM) in their portfolio at the end of the second quarter of the year, and 17 billionaires in our database liked the automaker as well. In fact, among all the filers we track General Motors Company (NYSE:GM) was the fourth most popular stock (see the full top ten list). General Motors Company (NYSE:GM) trades at 13 times trailing earnings, but recent U.S. auto sales numbers have been up and some bulls have suggested that the industry is poised for recovery as consumers are forced to replace their aging current vehicles. Wall Street analyst expectations imply a forward P/E of 8 and a five-year PEG ratio of 0.6.

Next on our list, with 13 billionaires long the stock, is Visa Inc (NYSE:V). Credit card stocks have been a favorite of “Tiger Cub” fund managers in particular; billionaire Andreas Halvorsen’s Viking Global reported a position of 2.4 million shares in Visa (find Halvorsen’s favorite stocks). The company’s revenue was up 17% in its most recent quarter compared to the same period in the previous fiscal year. However, markets have already priced in quite a bit of future growth at the company, and so the trailing P/E is 21. Still, growth is high enough that we’d be interested in comparing Visa to its peers.

hedge funds vs. mutual funds

Berkshire initiated a small position in DISH Network Corp (NASDAQ:DISH) last quarter. Other successful investors who like the stock include billionaire Leon Cooperman of Omega Advisors (research more stocks Omega owns). While Dish is priced quite expensively in terms of its trailing earnings, its valuation on a cash flow basis is more reasonable with a trailing EV/EBITDA multiple of 8.5x. However, at this price it is still dependent on future growth and recent results have not been good with revenue about flat in the second quarter of 2013 versus a year earlier. Adjusted earnings per share were actually slightly negative, and well below expectations.

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