Warren Buffett stocks insiders are buying

On top of being some of the Oracle of Omaha's favorites, they are also favored by their own insiders.

By GuruFocus.com Jun 27, 2012 12:48PM

It is a widely known investing axiom that insiders sell their companies' stocks for any number of reasons, but they buy for only one -- they think the stocks are going to go up.


Because Warren Buffett's stock-picking abilities helped make him one of the world's wealthiest men, checking into his portfolio for companies with heavy insider buying can be a good place to start research on worthwhile stocks.

 

The stocks in Buffett's portfolio with most active insider buying are: Coca-Cola (KO), Gannett (GCI), General Electric (GE) and The Washington Post (WPO).

 

Coca-Cola

Warren Buffett owned 200 million shares of Coca-Cola at the end of the first quarter, making it almost 20% of his portfolio. He has never sold a share of the company.

 

Coke had three directors buying shares in the second quarter. The largest purchase was worth more than $20.3 million by Director Barry Diller in April. While Diller's purchase price averaged about $77 per share, investors can buy the stock cheaper. It closed Tuesday at $75.08.

 

Six insiders also sold shares of the company in the second quarter.

 

Two days before Diller and another director bought shares, Coke announced that it was seeking approval for a 2-for-1 stock split. Coke's chairman was pushing for the split, the 11th in its 92-year history and its first in the last 16 years. Shareholders will vote on the split July 10.

 

"Our recommended two-for-one stock split reflects the Board of Directors' continued confidence in the long-term growth and financial performance of our Company," said Muhtar Kent, chairman and CEO of Coca-Cola. "Our system's 2020 Vision to double our revenues over this decade provides a clear roadmap for creating value for our consumers, customers, bottling partners and shareowners. A stock split reflects our desire to share value with an ever-growing number of people and organizations around the world."

 

Coke also announced in the first quarter its 50th consecutive annual dividend increase, giving shareholders an 8.5% raise from 47 to 51 cents per share per quarter.

 

Gannett 

Buffett owned 1,740,231 shares of Gannett Co. Inc. as of March 31, 2012, making it a mere 0.035% of his portfolio.

 

It tied with General Electric for the second-most insider buys in his portfolio, with one director making two purchases of 20,000 shares in the second quarter. Gannett closed at $14.04 Tuesday after a 6.3% jump. Multiple newspaper companies' stocks advanced on Tuesday after News Corp. announced the potential spin-off of its publishing entities.

 

In its first quarter results released April 16, Gannett announced earnings per share of $0.28 compared to $0.37 per share in the prior-year quarter. Net operating revenue was down 2.6% over the prior year in publishing advertising and publishing circulation, but increased in its digital and broadcasting segments.

 

Gannett's focus on establishing digital content and advertising platforms that will generate growth was evidenced in a 13% increase of digital revenue growth in its Publishing segment.

 

Regarding future plans, the company is expecting 2% to 4% annual revenue growth and greater earnings growth by 2015, and plans to return more than $1.3 billion to shareholders by 2015.

 

"In addition, our new all-access subscription model has been rolled out in 38 markets and is progressing as anticipated," Gannett's president and CEO Gracia Martore said at a presentation to media and entertainment analysts in New York last week. "New ventures like Digital Marketing Services and the USA TODAY Sports Media Group that leverage and extend our brands and assets are gaining traction and delivering results. We are confident in our strategy and our ability to achieve sustainable revenue growth while maintaining a strong balance sheet and generating increasing shareholder value."

 

The company also increased its revenue 150% to $0.80 per share annually and purchased approximately 2.4 million shares for $35.5 million during the quarter.

 

General Electric

Buffett owns 7,777,900 shares of General Electric, which is 0.21% of his portfolio. Two insiders bought shares of the company in the last three months. One was a director who purchased 30,000 shares for about $19.50 per share, and the second was a director who bought 4,000 shares at about $19.75 per share, both near the end of April. The stock closed Tuesday at $19.80 per share after a 1.43% increase for the day.

 

GE is a conglomerate of industrial products and financial services businesses and owns about 50% of NBC Universal. In the first quarter, GE announced its eighth consecutive quarter of operating earnings growth, and GAAP earnings from continuing operations of $3.3 billion, down 4% from the prior-year quarter. Revenues also declined 8% due largely to sales of NBCU and Garanti in the prior-year quarter.

 

GE also expects double-digit earnings growth in 2012 in its Industrial businesses and GE Capital and is hoping the global industrial business will capitalize on global growth. The company derives approximately 50% of its revenue from overseas.

 

GE Capital's first quarter earnings were $1.8 billion, up 27% excluding the sale of Garanti. The division benefited from the first profit in Real Estate since the third quarter of 2008. GE will also begin receiving dividend payments from GE Capital for the first time since the financial crisis. The dividend will amount to 30% of GE Capital's total 2012 earnings, it reported in May.

 

Earlier in June, The Wall Street Journal reported that GE is considering selling chunks of GE Capital as many investors feel the conglomerate is getting too large.

 

The Washington Post

Buffett owns 1,727,765 shares of the Washington Post Company (WPO) at the end of the first quarter, which is about 0.86% of his portfolio. He bought the shares in mid-1973 and is also the largest shareholder. In January, the Washington Post announced Buffett would not seek re-election to the board after his term expired in May. He had been on the board for nearly 40 years.

 

The last insider buy at the Washington Post occurred on Dec. 30, 2011. It was of 76 shares at an average price of $392 per share. The stock has since gotten far cheaper, closing at $363.55 on Tuesday, after gaining 0.18% for the day.

 

In the first quarter results, announced in May 2012, the company reported earnings of $31 million, increased to $15.2 million in the prior-year quarter. Revenue was $972 million, down from $1.04 billion in the prior-year quarter. The company's revenues increased in its television broadcasting division, were flat in its cable television division, and down in both its education and newspaper publishing divisions.

 

Though Buffett has been purchasing newspapers of late, he noted in a CNBC interview that he disliked the business model of not charging for their product, which the Washington Post has:

 

"Newspapers have been giving away their product at the same time they're selling it, and that is not a great business model. So when they put papers up on the internet and you get it free, you're competing with yourself… And you're seeing throughout the industry a reaction to that problem and an answer to it. You shouldn't be giving away a product that you're trying to sell," he said.

 

Other online papers, such as News Corp. (NWSA), The New York Times (NYT) and The Wall Street Journal, already charge for content.

 

More from GuruFocus

4Comments
Jun 27, 2012 10:52PM
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Nothing but more propaganda to buy what the insiders are selling as the market is headed for a neck breaking tumble. The profit taking before the crash.
Jun 27, 2012 11:58PM
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company I worked for CEO got caught in flating stock price an drew time????  insider trading thought it was illegal??
Jun 28, 2012 3:00AM
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And at least two of these companies have been caught up in major bid rigging scandals over the last few years...........if MSN is pumping it, it's time to dump it!  Oh, and the article forgot to mention that the financial arm that was recently purchased (from Metlife) is a huge cover up.............hmmm, I wonder how that huge lawsuit and charges, that the NY attorney generals office has against these companies, are coming along.

 

BTW, any news on how many shares of Metlife Warren Buffet owns?  Honestly, he's majority owner of Moody's also and they're placing ratings on his own companies..............talk about conflict of interest!  Sheesh, and the SEC and the government does nothing.

 

Looks like a good list of stocks to short!

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