Investors often look to Warren Buffett's purchases when trying to pick the best stocks to buy.
And with good reason: Buffett's conglomerate, Berkshire Hathaway (NYSE: BRK.A, BRK.B),
has an impressive track record and got off to a stellar start this year. Berkshire Hathaway gained 8.7% in January, beating the Standard & Poor's 500 Index's 6% rise and the Dow Jones Industrial Average's 7% increase.
It's also a good sign when Buffett's picks include companies with heavy insider buying, given insiders buy because they expect shares to rise.
That's why MarketWatch and Insider Monkey just took a look at Buffett's 38 holdings and compared his purchases to stocks that have had sustainable insider buying in the past 90 days.
And who knows better than insiders? These folks are privy to the most current information on their companies' prospects, and research shows stock prices rise more after insiders' net purchases than after net sales.
MarketWatch and Insider Monkey came up with the following five stocks to buy now, based on Buffett's holdings and insider buying.
Five of the Best Stocks to Buy Now
- American Express Co. (NYSE: AXP): This credit card company that targets affluent members has been a Berkshire Hathaway staple for years. Buffett has amassed roughly 49 million shares of AXP, or a 10.1% stake, making it one of Berkshire's largest holdings. In November 2012, AXP Director Jan Leschley acquired a sizable chunk of additional shares. Since then, the stock has jumped more than 16%.
- DeVita HealthCare Partners Inc. (NYE: DVA): In 2011, Buffett began accumulating shares of this dialysis and kidney care provider, which strives to improve patients' quality of life through innovative clinical care and integrated treatment plans. Buffett has acquired 14 million shares and now holds an 11.1% stake in the company. Berkshire is technically an insider in that it is classified as a large shareholder by SEC standards. Among reasons Buffett likes the company: Earnings are expected to grow at a very healthy 13% - 14%.
- Liberty Media Corp. (Nasdaq: LMCAD): Buffett began buying shares in this mass media company in late 2011 and now holds 5.5 million shares valued at more than $612 million.
Liberty Chairman John Malone purchased a hefty 490,000 shares in December 2012. The picture looks bright for Liberty, which just spun off Starz Media (Nasdaq: STARZ), its motion picture, animation, television and home video subsidiary. The Starz spinoff is expected to unlock both companies' value.
Liberty Media saved Sirius XM Radio (Nasdaq: SIRI) from bankruptcy in 2009 and now has majority control of Sirius. It's not clear what Malone has in mind for SIRI, but a better outlook for the ailing company is a given. Like Buffett, Malone is known as a savvy investor.
- General Motors Co. (NYSE: GM): Buffett has always liked General Motors and now holds 15 million shares worth more than $427 million. He took keen interest in the car company as it emerged from bankruptcy leaner and stronger. GM's balance sheet reveals both profit and losses are showing improving health.
Buffett's belief in the company is helping erase memories of the bankruptcy and bailout. Insider purchases are too. One of GM's directors spent $100,000 buying shares in November, and the stock has run up 11.5% since the buy.
- General Dynamics Corp. (NYSE: GD): Despite concerns about automatic spending cuts that would come with sequestration, Buffett still see great potential in government contractor General Dynamics, Berkshire's 24th-largest holding. Buffett now holds more than 3.8 million shares valued at more than $257 million. Insiders don't appear threatened by the budget talks either: Director William Osborn just bought 330,000 shares this month.
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