You may not realize it, but Omaha, Nebraska, is home to two of the money management industry’s top managers. The first has been called the “Sage of Omaha,” the “Oracle of Omaha” and sometimes simply “The Man”: He is the famous Warren Buffett. Buffett grew to legendary status when the world realized that he had invested just $10,000 in Berkshire Hathaway in 1965 and grew that investment to $50 million in 34 years (end of 1999). To give those numbers some perspective, if you had invested the same amount in the S&P 500 (NYSEARCA:SPY), you would have had just $500,000 to ring in the new millennium.
Along the way, Buffett has earned many admirers, but perhaps none so ardent as Wallace R. Weitz of Wallace R. Weitz & Co. Weitz is also from Omaha, and has known Buffett since 1976, longer than some hedge fund managers have been alive. Last year, Weitz’s fund returned 24.7%, 10 points higher than the S&P during the same period. Weitz follows a strategy very similar to Buffett’s, choosing companies based on expectations of future performance and estimates about ability rather than simple undervaluations in the market.
The top position Buffett and Weitz share is Wells Fargo & Co (NYSE:WFC). Buffett owns more Wells Fargo shares than does any other fund; his stake in the company is valued at almost $9.9 billion after he increased his position by 3% last quarter. In contrast, Weitz owns just $66.4 million in the company; it is his fifth largest position and a new one. However, the stock has been losing recently. It lost 13.4% since the end of June, significantly underperforming the S&P 500’s loss for the same period.
Buffett and Weitz also have large (and losing) positions in ConocoPhillips (NYSE:COP). Returns have been almost an 11% loss since the end of the second quarter. This may be closer to market performance, but it still means that both Buffett and Weitz are losing big on the company -- especially Buffett, since he had increased his position in ConocoPhillips by 27% last quarter. That's not to mention his position is 4 times the size of Weitz’s.
Both Omaha natives lost on US Bancorp (NYSE:USB), one of the few positions on which they differ. Buffett holds a $1.7 billion stake in the company, compared to Weitz’s modest $1.6 million; it is Buffett’s ninth largest holding. USB has cost Buffett and Weitz 15.3% since the end of June. However, Buffett may be on to something. Other hedge fund managers increased their position in the banking company significantly last quarter, like Jean-Marie Eveillard of First Eagle Management, who increased his position in USB by 369% last quarter.
Of Buffett and Weitz’s other common positions, only one other significantly underperformed the market. That stock was the Washington Post Co. (WPO), and it lost the most of their like positions, a whopping 23% since June. Buffett has been losing on this position consistently, but he holds on. It could be a good strategy, and Weitz certainly seems to be buying in out of curiosity with his $8.5 million position, but it could also be part of the reason why Buffett’s top positions have failed to outperform the S&P in 2009 and 2010.
The pair’s respective positions in the United Parcel Service (NYSE:UPS) have performed just under the market, producing a 9.3% loss since the end of June. The performance may not be that great, but Buffett is holding on: his stake in UPS is his 19th-largest. Moreover, other prominent fund managers like Tom Gaynor are holding heavy investments in the shipping company.
Buffett and Weitz agree on another stock enough that each hedge fund manager owns a stake, but not so much that they are going to see each other at stock meetings - Wal-Mart Stores Inc (NYSE:WMT). Buffett owns a position in the discount retailer valued at over $2 billion, compared to Weitz’s $29 million stake in the company. Wal-Mart has had a negative return of 1.4% since the end of June, but this is still markedly better than the market at large. Wal-Mart is also a favorite of Eagle Capital.
Other stocks that Weitz and Buffett agree on only marginally include Johnson & Johnson (NYSE:JNJ). Buffett owns $2.8 billion of the age-old company while Weitz has less than $670 million at stake. In spite of Weitz’s lack of faith, Johnson & Johnson has outperformed the S&P since the end of June. While its return has been negative (-2.8%), it is still higher than the market at large. Hopes remain high for the company. Jim Simons’ Medallion Fund (he is arguably the best hedge fund manager we have come across) puts more of his money in Johnson & Johnson than in any other equity position.
Buffett's and Weitz’s common stocks had only one that almost broke even – Procter & Gamble (NYSE:PG). Buffett has a position in the company valued at over $4.88 billion, but his admirer is less confident, investing just over $14.6 million in the company. Procter & Gamble is also another favorite of the venerable Jim Simons.
Disclosure: I am long SPY, COP.