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Within 45 days of the end of a calendar quarter, a U.S. institutional investment manager must report its holdings on Form 13F with the SEC. These 13F reports reveal what top investors are buying.

Goldman Sachs' Top 15 Holdings

There are total 10,582 line items in Goldman Sachs' (NYSE:GS) 2011 Q1 13F SEC filing with a total value of over $232 billion. The top 15 stock holdings are as follows:

Name (Symbol)

Forward P/E

GS Holding Value

Apple (NASDAQ:AAPL)

12

$2.0B

Cobalt International Energy (NYSE:CIE)

-

$1.3B

Dollar General (NYSE:DG)

13

$1.6B

Education Management (NASDAQ:EDMC)

14

$1.1B

iShares MSCI EAFE (NYSEARCA:EFA)

-

$1.2B

General Electric (NYSE:GE)

12

$1.3B

Google (NASDAQ:GOOG)

13

$1.6B

iShares Russell 2000 (NYSEARCA:IWM)

-

$2.6B

JP Morgan Chase & Co (NYSE:JPM)

8

$1.3B

Microsoft (NASDAQ:MSFT)

9

$2.1B

Oracle (NYSE:ORCL)

14

$1.3B

Pepsico (NYSE:PEP)

14

$1.6B

QUALCOMM (NASDAQ:QCOM)

16

$1.4B

Schlumberger N.V. (NYSE:SLB)

16

$1.6B

SPDR S&P 500 (NYSEARCA:SPY)

-

$5.6B

Goldman Sachs vs. Warren Buffett

In the above list, 3 are ETFs and 5 are tech stocks. Warren Buffett's holding company Berkshire Hathaway (NYSE:BRK.A)(NYSE:BRK.B) also filed 13-F to SEC on May 16, 2011. Berkshire Hathaway's 13F only has 95 line items (less than 1% of Goldman Sachs), even though the total value is over $53 billion.

Goldman Sachs and Warren Buffett have different investment styles: trading vs. long term hold. It is interesting to see that they have a common holding: General Electric is the only stock in the Goldman Sachs top 15 holdings also owned by Berkshire Hathaway.

Six Reasons to Buy General Electric

Even though GE is "too big to analyze", below are 6 reasons to buy this stock:

1. Lower P/E than S&P 500 and Industry:

Following metric from CNBC.com shows GE has lower trailing and forward P/E than S&P 500:

Name

P/E (TTM)

P/E (Fwd 12 Mo.)

PEG

GE

15.3x

13.9x

0.72x

Diversified Industrials

16.4x

14.1x

0.0x

Industrials Sector

18.8x

15.6x

-0.02x

S&P 500

19.5x

14.5x

-0.16x

The chart below shows how reliable GE's "Forward P/E" is. Data is based on the stock price divided by "future" 4 quarters total estimated earnings. For example, on Jan 1, 2009 the GE's stock price was $11.15, the next 4 quarters total estimated earnings were $0.9 ( 2009 Q1: $0.21; 2009 Q2: $0.23; 2009 Q3: $0.20 and 2009 Q4:$0.26). Therefore the "forward P/E" at that time was $11.15 / $0.9 = 12.4.


(Click to enlarge)

2. Higher Cash Flows and Dividend Rate:

GE's Price/Cash Flow ratio is 6.1, much lower than S&P 500's 11. In 2010 GE declared $5.2 billion in dividends. Currently its dividend yield is $3%.

3. Like S&P 500, GE is Well Diversified:

GE's products and services range from aircraft engines, alternative energy, power generation, water processing, household appliances to healthcare and finance. GE has strong global brands. Based on Millward Brown's report, in 2010 GE is among the top 10 most valuable global brands.

4. Too Big to Fail:

GE is the symbol and the "backbone" of American business. After Warren Buffett casted vote of confidence in GE with $3B investment in October 2008, it is unlikely for him to let GE go under again, or become "Government Electric."

5. 21% Potential Gain:

According to First Call, the price target for GE is $24.07, which is 21% higher than today's price of $19.76.

6. Better Deal than Warren Buffett:

Warren Buffett's warrants to buy almost 135 million General Electric common shares at $22.25 each are still underwater. At today's price, you could buy GE at much less price than Warren Buffett's.

Conclusion

Strategy mix of the hedge fund industry has changed. In 1990, the industry was dominated by funds that followed a global macro strategy. In 2008, a sizable majority of funds followed equity based strategies, such as long–short equity and event-driven approaches, according to an article titled "The ABCs of Hedge Funds: Alphas, Betas, and Costs" published in Financial Analysts Journal January/February 2011 issue.

Retail investors can certainly follow the top money managers after we do our own research. Even GE has lower growth rate than S&P 500 and huge debt, its current stock price seems reasonable compare to earnings. In addition, it is "too big to fail" status and 3% dividend make it attractive for income investors looking for relative safe alternative to U.S. treasure.

Source: Data is from Yahoo Finance, CNBC, SEC and TickerSpy.com and is valid as of May 18, 2011.

Source: Q1 13-F Watch: Goldman Sachs and Warren Buffett's Common Holding - General Electric