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Warren Buffett, Chairman and CEO Berkshire Hathaway (NYSE:BRK.A), is by most definitions a legend in the field of finance and certainly one of the most watched people in finance. Commonly referred to as the “Sage of Omaha,” investors follow him, hedge fund managers follow him and even the mainstream media keep an eye on his every move.

After all, Buffett has been at the forefront of some of the largest stock booms and busts, frequently making a couple hundred million in a day (click here to read about Buffett’s $200 million gain). He uses a simplistic “Value Strategy” and always looks for companies with the best managers.

Buffett has been in finance a long time and his strategy has seen him through some of the toughest stock markets in history. However, that is not to say he is infallible for instance, Buffett’s alpha (basically, risk-adjusted return) was effectively 0 from 2000-2009 (click here to check out Buffett’s drift). More recently, Buffet’s top stock picks are outperforming the S&P 500 though. Buffet’s top stock picks earned a negative 6% return since the end of the second quarter compared to the S&P 500’s negative 9% return over the same period.

Company

Ticker

Value (x1000)

Activity

Return Since June

Coca Cola

KO

13457999

0%

1%

Wells Fargo & Co.

WFC

9886312

3%

-10%

American Express

AXP

7838273

0%

-11%

Procter & Gamble

PG

4880018

0%

-2%

Kraft Foods Inc.

KFT

3504245

-5%

-2%

Johnson & Johnson

JNJ

2835387

0%

-3%

ConocoPhillips

COP

2789070

27%

-9%

Wal-Mart Stores,

WMT

2074433

0%

-5%

US Bancorp

USB

1761196

0%

-11%

Moody's

MCO

1089725

0%

-15%

Washington Post

WPO

723848

0%

-13%

M & T Bank

MTB

471749

0%

-15%

Costco Wholesale

COST

352042

0%

-9%

USG Corporation

USG

244815

0%

-39%

Torchmark Corp.

TMK

181124

0%

-14%

Sanofi Aventis

SNY

163238

0%

-12%

General Electric

GE

146691

0%

-13%

Mastercard Inc.

MA

122043

88%

11%

United Parcel Service

UPS

104232

0%

-10%

Verisk Analytics

VRSK

72741

NEW

-7%

GlaxoSmithKline

GSK

64800

0%

-1%

Dollar General

DG

50760

NEW

-5%

Bank of New York

BK

45960

0%

-18%

Exxon Mobil Corp.

XOM

34326

0%

-8%

Ingersoll-Rd

IR

28881

0%

-31%

Gannett Inc.

GCI

24920

0%

-25%

Comdisco Holding

OTCQB:CDCO

9583

0%

12%

Out of Buffett’s top 27 stock picks, less than half outperformed the S&P 500 since the end of June and only three positions had positive returns. Buffett gained 1% in Coca-Cola (NYSE:KO), 11% in Mastercard Inc (NYSE:MA) and 12% in Comdisco Holding (OTCQB:CDCO). Comdisco is actually one of Buffett’s smaller holdings; he has just 9.5 million shares compared to almost 13.5 trillion he holds in Coca-cola, his largest position.

Berkshire initiated a $51 million brand new position in Dollar General (NYSE:DG) during the second quarter. The diminutive size of the position means that Buffett’s prodigy, the underpaid Todd Combs likely picked the stock. Buffett has said repeatedly “if a position is small, it is probably picked by Todd Combs”.

Mastercard, the second most profitable position, is also one of Buffett’s smaller positions and likely attributable to Combs, making Combs almost entirely responsible for helping Buffett’s top stock picks outperform the market, on average, since last quarter.

Buffett’s largest loss was -39% via his USG Corporation (NYSE:USG) position. USG may have cost the “Sage of Omaha” money but most hedge funds are not only staying with the company, they have been increasing their positions; Ken Griffin upped Citadel Investment Group’s position by 157% while Diamondback Capital’s Richard Schimel increased his hedge fund’s position by over 200% during the first quarter.

We like Buffett; who doesn’t? But, based on his recent performance, investors may opt to mirror Buffett’s protege Combs instead of the “Sage” himself.

Disclosure: I am long COP.

Source: Warren Buffett's 27 Favorite Stocks