By Eric Winter
Warren Buffett is one of the best examples of a "buy and hold" investor, often purchasing stocks and sitting on them for years and years. His "long haul" methodology of investing has produced some outsized returns, and following his long-term convictions can be a good lesson in value investing. Following our small-cap strategy since its inception in September of last year has produced some outsized returns as well; the strategy is up over 37% since then, compared to the market's return of 12.9%. We've sorted through Buffett's positions going back a year and have found five that the investor substantially increased his size in since that time.
The Bank of New York Mellon Corp. (BK) sits at the top of our list, meaning that Buffett increased his position in BK the most dramatically from Q1 2012 to Q4 2012. His position size grew 250% in that time period, from 5.6mm shares to 19.6mm shares. The stock gained 24% in 2012 and has continued to climb in 2013, up 5% since the turn of the year. BK recently reported earnings on the 17th of April, missing by two cents and delivering a slight miss on revenue as well. Sell-side outlook of BK is still positive, however, with mean price targets a year out still showing a potential 4.4% increase from current levels. Billionaire Mario Gabelli of GAMCO Investors carries nearly 6mm shares of BK.
General Motors (GM) saw continued buying support from Buffett as well, with his position size growing by 150% in 2012. In the first quarter of last year, Buffett showed holdings of 10mm shares, only to end the year with 25mm shares. GM delivered an excellent annual return in 2012 as well, netting investors 37% even despite a large dip in the summer. GM is still widely popular amongst the 400+ funds we track, with almost a quarter claiming a position in the automaker. General Motors intends to bring its production capacity up to 5mm vehicles a year with its plans to add four plants in China over the next three years. Billionaire David Einhorn of Greenlight Capital has a position almost comparable to Buffett's, registering at over 21mm shares.
DaVita Healthcare Partners, Inc. (DVA) carries the smallest market cap of the stocks on our screen, coming in at under $13 billion. The provider of dialysis services saw its support from Buffett increase 127% in 2012, with his share size increasing steadily each quarter. Showing once again that Buffett adds substantially to his winners, DVA gave huge returns in 2012 as well, up over 41%. The stock recently received an upgrade from Deutsche Bank at the start of April, claiming that the company has a potential to generate earnings greater than $9/share in cash EPS. Billionaire Andreas Halvorsen of Viking Global keeps over 1.5% of his $14.4 billion portfolio in DVA.
Liberty Media Corporation (LMCA) has been making some very high-profile moves in the entertainment industry lately, which can possibly stand as a big reason why Buffett increased his position size in the stock by 87% from Q1 2012 to Q4. Liberty Media spun off its premium movie channel Starz officially at the start of this year and has also been involved in deals with Sirius XM Radio, Barnes & Noble, and Charter Communications. LMCA is looking to buy a 27% stake in Charter for $2.6 billion and may still be poised for more M&A activity. Billionaire James Dinan of York Capital Management has over a million shares of LMCA, representing 3% of his AUM.
DirecTV (DTV) rounds out our list, with Buffett pushing his 23mm shares at the start of 2012 up to 34mm by the end of that year, equating to a nearly 50% increase. The digital television provider recently received a buy rating from Stifel Nicolaus in the middle of April, augmenting Guggenheim's upgrade to Buy that was announced a month prior. DTV is up 10% this year alone and is trading near its 52-week highs. The company recently dropped its bid to increase its Latin and South American presence by buying Vivendi's (OTCPK:VIVEF) Brazilian unit; the move came as a relief to shareholders and saw a 6% increase in share price after the announcement. Famed investor Jim Simons of Renaissance Technologies has over $200 million invested in DTV.