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David Winters and Wintergreen Advisers’ Top Picks

David Winters founded Wintergreen Advisers in 2005 after a career at Franklin Mutual Advisers, where he served as chief investment officer. Wintergreen engages in fundamental research and compares the market value of public companies to quantities such as book value and earnings. It primarily invests in global equities. Wintergreen prefers to buy and hold a relatively small number of stocks over a long time horizon. Read on to see some of the fund’s top picks according to its 13F filing for the second quarter or see our full list of David Winters’s stock picks.

hedge fund research

Winters must be a modest guy: the fund’s top pick was Berkshire Hathaway Inc. (NYSE:BRK.B), with Wintergreen reporting ownership of 1.2 million shares of Warren Buffett’s holding company. Buffett is a great value investor (see Warren Buffett’s new stock picks) and the Wintergreen team seems to think that Berkshire Hathaway is a good place to start a value portfolio. Berkshire Hathaway’s stock is up about 12% so far in 2012, about even with the S&P 500.

Altria Group, Inc. (NYSE:MO), one of the pieces of the old Phillip Morris, was another of Wintergreen’s favorite stocks as the fund owned 2.8 million shares of the tobacco company at the end of June. Altria recently increased its dividend and now offers a yield of 5.1%. Given this dividend and a beta of 0.4, Altria makes for a good defensive stock for investors who are worried about U.S. macro or who want to diversify away from higher-risk investments. Altria also trades at 16 times trailing earnings and has been growing its business recently; again, given the sizable dividend yield, it could make for a good value stock as well.

Franklin Resources, Inc. (NYSE:BEN), a $26 billion market cap asset management company, was Wintergreen’s third largest holding according to the 13F. The fund increased its stake by 31% during the second quarter to a total of about 760,000 shares. Franklin Resources has been struggling recently, reporting a 4% decline in revenue and a 10% decline in earnings last quarter compared to the same period in 2011, and its stock has lagged the market over the past year as well. On an earnings basis the stock looks like a potential value play- a trailing P/E of 14 and a forward P/E of 13- and we think that is what Winters and his team like about it.

Wintergreen owned Phillip Morris International Inc. (NYSE:PM) as well as Altria Group, and the 950,000 shares of the former company that it owned placed it in the fund’s top five positions as well. Phillip Morris has more of a global focus than Altria, and the rising dollar hurt its business last quarter. Its dividend yield is lower than Altria’s but is still a respectable 3.5% and the company is priced at similar levels (18 times trailing earnings and 15 times forward earnings estimates). Billionaire Ken Fisher’s Fisher Asset Management increased its stake in Phillip Morris last quarter and closed June with 2.7 million shares in its portfolio.

Canadian Natural Resource Ltd (NYSE:CNQ) was another of Wintergreen’s favorite stocks as the fund owned 2.6 million shares of the exploration and production company. Canadian Natural Resource drills for oil, natural gas, and natural gas liquids worldwide with a focus on North America. Its margins took a hit last quarter as the company reported good revenue growth compared to the same period in 2011 but its earnings fell. Canadian Natural Resource is another stock that is cheap on a quantitative basis, as it carries trailing and forward P/E multiples of 12. The fund has had a large position in the stock since at least the end of 2010.

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