Now and then, it is nice to take a peek over the shoulder of a “master of the universe” to see what his or her high-conviction buys are, be they hot growth prospects or tried-and-true dividend stocks. When you read a headline that “Warren Buffett is buying Company X,” you’re naturally inclined to do a little digging into Company X’s financials.
After all, if it’s good enough for Warren Buffett, it might be good enough for you.
You have to be careful with this line of thinking, of course. The SEC 13F filings that disclose these holdings are generally pretty dated by the time we have access to them. For all we know, the conditions that made a guru buy a given stock may no longer be valid by the time we read about it, and there are no guarantees that these managers haven’t already sold it. There also is no way to track hedges or offsetting short positions in the event the stock is part of a pair trade, nor are derivatives or options positions mentioned at all.
For these reasons, I tend to focus on larger holdings — the conviction buys that fund managers are likely to hold onto for a while.
Today, I’m going to look at high-conviction dividend stocks from five well-known superinvestors. My criteria is simple enough: The stock must be a significant holding in the guru’s portfolio, and it must pay a respectable dividend.