Since we last looked into companies that are in Warren Buffett ‘s portfolio, which had also witnessed insider purchases quite much has gone on. Over the past three months, several of the companies on which Buffet holds stakes have seen their insiders acquire their stock. The simple fact that an investment guru like he finds the stock worthy is reason enough to take a close look. If we add insider activity to this equation, chances to outperform the wider market grow considerably. Insiders have strong incentives to diversify their wealth away from the company they work for — and therefore reduce their risk. Them ignoring the benefits of diversification and buying the company´s stock anyway can be interpreted as a signal of high confidence in the company. Thus, let´s take a look at these cases:
First in this list is The Coca-Cola Company (NYSE:KO), the $170 billion market cap worldwide beverages giant. This is Berkshire’s second largest holding, comprising more than 15% of its portfolio. With 400 million shares, worth more than $16 billion, the fund is the largest institutional shareholder at the beverages company.
But not only Mr. Buffett is bullish on The Coca-Cola Company (NYSE:KO); insiders are too. Over the past couple of months, five insiders have bought the company’s stock. The first acquisition took place on Feb. 24th. Ana Botin, Board Director, started a position in the stock with 2,500 shares of the company, for $37.25 per share. On that same date, another Director, Elena Maria Lagomasino, purchased 7,981 shares of the company for $37.57 per share, increasing her holdings to 23,631 shares of the company, worth more than $897,000.
On March 25th, Muhtar Ahmet Kent, Chairman and CEO, bought 10,500 shares of the company for $37.91 each, increasing his stakes to 262,118 shares, valued at more than $9.95 million. Then, on Feb. 27th, Richard Daley, Board Director, procured 1,500 shares of The Coca-Cola Company (NYSE:KO) and now holds 5,500 of them. Finally, on March 11th, Alexander J Douglas Jr., Senior Vice President, acquired 2,585 shares for $38.76 each, and now owns 135,972 shares of The Coca-Cola Company. Moreover, prominent investors Donald Yacktman and Michael Larson, also hold billionaire stakes in the stock.
DaVita HealthCare Partners Inc (NYSE:DVA) – a $14.46 billion market cap provider of dialysis services- usually makes it to this list, but the reason is rather peculiar. The insider purchasing stock in this case is Ted Weschler, one of Buffett’s two investment managers, so basically, the fund and the insider are the same entity. As a member of a 15% owner group, Mr. Weschler must declare his purchase as an insider at the SEC. As we have stated in previous articles, DaVita HealthCare Partners Inc (NYSE:DVA) has been a great long-term investment that appreciates at a respectable rate. And, although it most probably won’t outperform a market that delivers a 30% return over the short-term, it is likely to beat the market over a 5-year investment horizon.
Between February 24th and February 26th, Mr. Weschler (and thus Berkshire) increased his participation in this mid-cap health care company by 3%, to more than 37.6 million shares. The holdings are worth more than $2.3 billion, and account for approximately 2.2% of the total value of the fund’s equity portfolio. Billionaires Stephen Mandel , D. E. Shaw, William Gray , and value investor Joel Greenblatt are betting on DaVita HealthCare Partners Inc (NYSE:DVA) too.
Another large-cap company that has seen an insider purchase its stock lately is Visa Inc (NYSE:V), the $127 billion market cap payments technology company. Buffet holds more than 1.55 million shares of the company, valued at more than $340 million. In addition, one Board Director, Alfred Kelly Jr., recently started a position at Visa Inc (NYSE:V) with 1,575 shares, in a transaction that totaled more than $350,000. Other big names with high stakes in this stock are Ken Fisher and Andreas Halvorsen.
Finally, there’s Phillips 66 (NYSE:PSX), which was also present in our previous list of Buffet stocks bought by insiders. This $44.25 billion market cap downstream energy company of which Berkshire holds more than 27 million shares (worth more than $2 billion) saw one of its Board Directors spend more than $1 million in its stock this year. On Jan. 31st, William Loomis Jr., acquired 13,600 shares of the company for $73.55 per share, and now owns 21,360 shares. In addition, the insider receives his compensation as a director in the form of stock units that convert to Phillips 66 (NYSE:PSX) common stock on a 1-for-1 basis, and has already accumulated an extra 9,751 shares of the company. In addition to this insider and Mr. Buffett, other major hedge fund managers are also betting on this stock. This is the case of D E Shaw, who recently increased his stakes in the company by 37%, to 6.9 million shares, and Larry Robbins, whose fund owns more than 2.4 million shares of Phillips 66 (NYSE:PSX).
Disclosure: Javier Hasse hold no position in any stocks mentioned