David Winters Top Buys: McDonald's Corp. and Fairfax Financial Holdings

(GuruFocus, September 23, 2009) In the latest semi-annual report, Investment Guru David Winters discussed what kind of companies he is looking for to invest:

Around the world many businesses continue to grow in strength. It is also becoming clear that some businesses will not survive, and for some businesses it is still too early to know whether or not they will make it. The characteracteristic we seek for good investments, which we often refer to as the “Trifecta”, continue to be good guideposts for us:

1. Solid business with good and improving economics,

2. Good management working for the long-term shareholders, and

3. Security availability at an attractive price

In light of recent changes to the world economy, searching for companies that meet these descriptions is providing interesting global results. The world market has altered business realities for many companies, as managements are being tested to adapt to new economic pressures for all investors and security prices must be analyzed in an attempt to determine the true discrepancy between market price and the intrinsic value. We believe these altered business realities are creating some phenomenal opportunities for Wintergreen to own some top-notch companies at what we believe are attractive prices.

Not in that order, the Trifecta is exactly the same tenets another Investment Guru, Donald Yacktman used in his investment process. Read the WSJ interview transcript for details. Oh, BTW, I sidetracked to Yacktman because GuruFocus is having a web-based Q&A with Don Yacktman and his son Brian Yacktman, a must-attend event for us who are serious about value investing. Click here for details.

With that much said (quoted, acutally), these are the two companies that Winters bought during the second quarter:

No. 1: McDonald's Corp. (MCD, Financial), Buy: 0.69% of the portfolio - Total: 45,750 Shares

McDonald's Corporation develops operates franchises and services a worldwide system of restaurants that prepare assemble package and sell a limited menu of value-priced foods. The company operates primarily in the quick-service hamburger restaurant business. All restaurants are operated by the company or under the terms of franchise arrangements by franchisees who are independent third parties or by affiliates operating under joint-venture agreements between the company and local business people. Mcdonald's Corp. has a market cap of $60.91 billion; its shares were traded at around $55.81 with a P/E ratio of 15 and P/S ratio of 2.6. The dividend yield of Mcdonald's Corp. stocks is 3.6%. Mcdonald's Corp. had an annual average earning growth of 7.2% over the past 10 years.

Winters bought 45,750 shares during 2Q09.

No. 2: Fairfax Financial Holdings Ltd. (FFH, Financial), Buy: 1.65% of the portfolio - Total: 25,100 Shares.

Fairfax Financial Holdings Limited is a financial services holding company which through its subsidiaries is engaged in property casualty and life insurance and reinsurance investment management and insurance claims management. Fairfax Financial Holdings Ltd. has a market cap of $7.46 billion; its shares were traded at around $378.78 with a P/E ratio of 6.5 and P/S ratio of 0.9. The dividend yield of Fairfax Financial Holdings Ltd. stocks is 2.1%.

Winters bought 25,100 share of FFH in 2Q09.

Conclusion

For the 2Q09, Winters did not really buy much stocks. Only two stocks: FFH and MCD. Do they fit the bill of the Trifecta?

And it is not because he was out of cahs; Cash and short term securities is running at 13.3% high. No wonder he is waiting for the price to come down a little to jump is, according to this CNBC interview:



GuruFocus provides real time information and insights of Investment Gurus such as Warren Buffett and David Witners for Premium Members. If you are not a premium member, click here to sign up or upgrade. 7-Day Free Trial is available.