Warren Buffett is one of the most successful investors in the
world. Hisinvestment strategies and ability to pick long-term
winners has catapulted him to become the second-richest person in
the United States, with anet worth of more than $53 billion,
according to Forbes.
So when Buffett buysstocks , themarket doesn't just listen, it
follows. This is frequently referred to as the "Warren Buffett
effect," where news that the Oracle of Omaha is initiating or
adding to a position can generate sharp interest in astock and up
In his latest form 13-f filings, aquarterly report ofequity
holdings that institutionalinvestment managers with at least $100
million in equity assets under management are required to file,
Buffett's largest stock purchases of 2012 were revealed.
Knowing his main interests and major stock picks can help regular
investors like you and me to detect a safe and compelling
investment theme or winning market trend. These are the types
ofinvestments you would find in Elliott Gue's
Top 10 Stocks
newsletter, which covers stocksoffering market-beatinggains and
With this in mind, here is a list of Warren Buffett's six biggest
stock buys in 2012.
Buffett's six biggest stock buys of 2012
As you can probably tell, the group has many of the classic
traits that have come to characterize a "Buffett investment." All
stocks are leaders in their respective industries. They are also
protected by a wide moat, which means they operate in industries
with high barriers to entrance, making it difficult and
capital-intensive for newcomers to challenge incumbents.
Buffett's six biggest stock purchases of 2012 are also
characterized by strong long-term growth potential at a
compelling valuation, because much like many consumers across the
world, Buffett loves a good deal.
Of the six featured, I particularly like
National Oilwell Varco (
because of its attractive valuation and
DaVita HealthCare Partners (
because of itsleverage against thebullish trend in health care.
National Oilwell Varco
National Oilwell Varco is a leading provider of equipment and
components to the oil and gas drilling industry and has amarket
cap of $28 billion.
Even though Buffett bought more than 5 millionshares in 2012, one
of his six-largest stock buys, it hasn't been enough to push
shares up -- they're still down 16% in the past year. This
short-term weakness is consistent with general weakness in energy
stocks after a big collapse in natural gas prices, but the
long-term outlook for National Oilwell Varco is bullish.
Analysts are looking for 4%earnings growth, but expect demand to
pickup in 2014, calling for 14% earnings growth. The five-year
growth rate is even better, projected at 17% annually. The
weakness in shares while earnings have held mostly strong has
created compelling value in the stock. Shares currently trade
with a forward price-to-earnings (P/E ) ratio of 11, a sharp
decline to its 10-year average of 17.
DaVita HealthCare Partners
DaVita HealthCare Partners is a leading provider of kidney
dialysis services, owning and operating hundreds of kidney
dialysis centers across the United States.
Much like other stocks in the health care sector, DaVita has been
hot in the past year, posting a market-beating 36%gain in the
past 12 months. No doubt that was helped by Buffett's interest in
the company. The Oracle of Omaha bought 10.9 million shares in
2012 to become its largest shareholder with a 16% stake. DaVita
is taking an aggressive approach to growth, acquiring close to
100 new dialysis centers in 2012, while opening another 70. That
has analysts looking for big gains in 2013, projecting 20%
earnings growth for the year.
The long-term outlook is bullish too, with analysts looking for
annual earnings growth of 13% in the next five years. But in
spite of the stock's big gains and bullish growth projection,
DaVita still trades with aPEG ratio of 1.23, directly in line
with its peer average.
Risks to Consider:
With Buffett already deploying bigmoney into these stocks,
one of the biggest institutional investors is already in the
trade. Although there could be plenty of follow-up interest,
Buffett has already staked out large positions in each stock.
Action to Take -->
Considering Buffett's long-term approach toinvesting means he
thinks the group is set for big gains in the years to come.
National Oilwell Varco and DaVita HealthCare Partners especially
caught my attention because of their strong long-term growth
potential and compelling valuation.
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