"The ultrarich, including me, will forever pursue investment opportunities," argues the Oracle of Omaha. "Maybe you'll run into someone with a terrific investment idea, who won't go forward with it because of the tax he would owe when it succeeds. Send him my way. Let me unburden him."
Buffett's close is only half tongue-in-cheek. Buffett already has his two favorite stock pickers, former hedge fund managers Todd Combs and Ted Weschler, at the helm of
mammoth $75 billion equity portfolio. But only a handful of new investment opportunities popped up on the team's radar in the most recent quarter -- that's why it's worth taking a closer look at what everyone's favorite octogenarian billionaire is buying right now.
To do that, we're scouring Berkshire's latest 13F filing.
Institutional investors with more than $100 million in assets are required to file a 13F -- a form that breaks down their stock positions for public consumption. By comparing one quarter's filing to another, we can see how any single fund manager is moving their portfolio around -- and what investments are faring the best for them. More importantly, we can figure out what names the big money likes the most right now.
So, what companies made that made Berkshire's "buy" list are worth watching? Here's a look at
Deere & Co.
Buffett and company's biggest new buy is agricultural equipment giant
Deere & Co.
. Deere is hardly an under-the-radar buying opportunity -- with a $33 billion market capitalization, this blue chip stock is a name that everybody already knows. But the team at Berkshire still likes Deere enough right now to shell out the cash for 3.98 million shares. That carries a value of $328 million right now.
Deere is the most recognizable name in agricultural and construction equipment -- most of the people wearing those signature green John Deere hats haven't sat in a combine before, much less plowed a field. But that brand strength is critical for Deere. It keeps the brand at the front of commercial clients' minds, and hit helps to fuel sales for the firm's consumer products. Deere has never been the price leader. Instead, it's focused on harnessing a quality reputation and the latest technology to sell tractors and combines. The strategy has worked well for DE, and maintaining that valuable brand gives it an edge that rivals don't have.
Investors shouldn't ignore the fact that Deere owns its own captive finance arm, not unlike many car companies. The key difference is the fact that the machines financed through Deere are substantially bigger-ticket, and they're the lifeblood of commercial farming operations. That's helped keep defaults lower than many analysts expected in the wake of the Great Recession. And now, Deere's finance unit is another major ace in its pocket: in this environment, the firm has access to exceedingly cheap capital, and it should be able to stoke the growth fires as a result.
As Deere expands its international reach, the firm should be able to turn out impressive growth numbers. That growth isn't priced into shares right now.
The business may be boring at
, but Berkshire Hathaway is proof positive that boring stocks can produce some truly exciting returns. PCP manufactures metal castings and fasteners for aerospace and industrial customers, churning out everything from the rivets used on assembly lines to the structural castings that give jet engines their strength. Berkshire Hathaway initiated a position of 1.25 million shares of PCP in the latest quarter, buying up a stake worth $204 million right now.
Even though Precision Castparts may not have the houshold name status of Deere, this metal products firm is every bit as dominant in its key markets. PCP's jet engine components, for instance, are used by every major turbine manufacturer on the market -- that lack of competition is a big defense for PCP's income statement. With orders for more efficient next-generation commercial aircraft on the upswing, orders should continue to climb for PCP over the foreseeable future. The firm's scale is also important. Because PCP is bigger than competitors in the forged metal business, its able to produce larger single pieces than many other firms are capable of making.
Cost is critical for PCP's success, but most of the firm's capital expenditures are modest at this point, and much of the capital-intense parts of the business are already paid for. On the balance sheet, Precision Castparts is essentially debt-neutral, with cash and investments offsetting the firm's relatively small debt load. A deal announced this month to acquire
for $2.9 billion should dramatically increase PCP's capabilities in supplying its customers with titanium products, an important metal in the aerospace business.
2012 has been a stellar year for shareholders in
-- shares of the mid-cap truck part maker have rallied close to 40% since the first trading day of January. But that huge price appreciation may be far from over. Warren Buffett bought shares of WBC with both hands in the most recent quarter, picking up 1.6 million shares for a $92 million stake in the firm. The new buy gives Berkshire Hathaway 2.5% ownership of the Piscataway, New Jersey-based firm.
Wabco is a key supplier to the commercial truck and bus manufacturing industry, providing critical components like brakes, suspensions, and telematics systems found in around two out of three new commercial vehicles delivered each year. The mission-critical nature of Wabco's systems gives it a defensible moat -- tractor-trailer manufacturers aren't likely to switch brake or clutch control providers on cost alone, particularly if that switch could impact safety or reliability. While Wabco enjoys standard-bearer status as a supplier to the commercial vehicle market, the firm also supplies components for passenger cars.
Financially, Wabco is in stellar shape, with more than $225 million in cash on its balance sheet, and zero debt. The firm has been working to pay down its debt for the last several years, so the debt-free status in the most recent quarter should lead to extra value being returned to shareholders now that WBC has considerable excess free cash that its generating each quarter. That's a good reason to give this firm a second look...
Wabco isn't the smallest name on Berkshire's buy list right now. That honor goes to
, a small-cap news media company based in Richmond, Virginia. Buffet bought 4.65 million shares of the media firm, buying 17% of MEG's outstanding shares this past quarter.
Buffett is no stranger to Media General either -- Berkshire acquired 63 local newspapers from the company back in May, and extended a $400 million loan to Media General as part of the deal. But Buffett's close connection with the firm has spurred the desire for an even closer one, so the team in Omaha has been buying up shares. Media General's news assets run the gamut, ranging from broadcast TV stations to news websites and mobile sites.
While a slump in advertising spending has been challenging for much of the newspaper industry, Buffett believes that local news is immune. That's one of the biggest reasons why he's been making such a big bet on it through MEG. While this firm is financially less robust than the others on the list, its broad collection of assets in the Southeast helps to make up for it. A tight financial relationship with Berkshire should help ensure that MEG has the wherewithal it needs to weather any speed bumps along the way back to profitability.
wasn't one of Berkshire's four new positions, it was a significant one in the last quarter -- the firm upped its stake in the automaker by 50%, adding another 5 million shares to its portfolio. That gives Berkshire a $341 million interest in General Motors at current price levels.
General Motors emerged from bankruptcy with little in common with its former self: its balance sheet was more flush, its cars were better built, and its reputation was restored -- with everyone except for investors, that is. Not surprisingly, a bankruptcy where shareholders get wiped out leaves a bad taste in most people's mouths. But GM has been working hard to show investors that it's back; record profitability this year certainly doesn't hurt.
Liquidity isn't a problem today for GM -- the firm currently boasts more than $40 billion in cash and investments on its balance sheet. Selling cars isn't an issue either -- a more streamlined brand portfolio has left GM with more logical sales funnels and build quality actually has consumers buying American again. Recently announced deals to give GM more control over its captive finance arm should be a big boost in the arm for sales, especially with interest rates floating near zero right now.
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At the time of publication, author had no positions in stocks mentioned. Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to
. Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in
Investor's Business Daily
, and on
Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.