How Did Buffett Stocks Fare in the Downturn?

Here's an important fact for every investor to realize: You're not a bad person if your portfolio goes down. I'm serious. People feel awful when their net worth, like a broken clock, ticks backwards.

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) (up 13% during this period), Coca-Cola(KO) (up 2%) and Procter & Gamble(PG) (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.