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How Did Buffett Stocks Fare in the Downturn?

James Altucher

The key to financial success in these choppy markets is in how you react during periods of volatility, not whether you are a genius in bull markets or if you top-tick your shorts and make money in bear markets. Let's take a look at the professional investors for some perspective.

At Stockpickr, we keep track of the top positions of the best pros, but in particular I want to look at how the stock holdings of my favorite investors held up since the recent market top on July 19.

First, we'll take a look at Warren Buffett. (Tomorrow I will take a look at George Soros.)

On the whole, Buffett's stocks did horribly, but it's how they are positioned going forward that's key. Of Buffett's top 30 positions, 27 of them have gone down since July 19. On average, the 30 positions were down 7% each (note, this assumes equal weighting).

The three positions that were up include Iron Mountain(IRM Quote) (up 13% during this period), Coca-Cola(KO Quote) (up 2%) and Procter & Gamble(PG Quote) (up 4.7%).

Iron Mountain is a new position for Buffett and, I believe, one of the most interesting he's ever chosen. With a price-to-earnings ratio , or P/E, of 48 and a forward P/E of 32 and $3 billion in debt, Iron Mountain is clearly not a value position. It underlines the point I consistently make that Buffett is a demographic investor and not a value investor. He bets on broad trends -- in this case, an increased need for document management, storage and record-keeping in an ever-more-complicated regulatory environment.

I also like P&G on the Buffett list, particularly with its recently announced $30 billion stock-buyback program on top of a 19% year-over-year earnings increase, demolishing analyst estimates and successfully integrating its acquisition of Gillette.

Some of the positions that haven't weathered the recent downturn so well -- but that I think are now cheaper buys as a result -- include the railroad Burlington Northern(BNI Quote) (down 14%), which Buffett just averaged down on, drugmaker Johnson & Johnson(JNJ Quote) (down only 2%) and oil company ConocoPhillips(COP Quote) (down 11%).

The good news on Burlington Northern is that Buffett has been steadily adding to his position. Last week, he revealed in new filings with the Securities and Exchange Commission that he had purchased 1.6 million shares of Burlington Northern. Buffett now owns 11.1% of the railroad company, suggesting that Burlington Northern is a buy.

Buffett also doubled his position in Johnson & Johnson early this year, now holding 48 million shares, making it his fifth largest position. J&J, trading at a forward P/E of 14 and offering a 2.7% dividend yield, is a broad play on the demographics of the 70 million retiring baby boomers who will have increased health-care needs in coming years. Any dip in J&J is a buying opportunity, so why should we let Warren Buffett have all the fun?

To see his other holdings, check out the Warren Buffett portfolio on Stockpickr. Also, for another interesting view of Buffett's holdings, check out the Highest-Yielding Warren Buffett Stocks on Stockpickr.com.