Tickers in this Article: DG, MA, FDO, WFC, NYSE:BRK.B
Tis the season again for 13F filings - the SEC reports that detail investment activity from investment funds and holding companies. As one of the shrewdest and most successful investors of all time, Warren Buffett (and his company, Berkshire Hathaway (NYSE:BRK.B)) is one of the most carefully watched investors. Yesterday, Berkshire's 13F filing revealed what Buffett and his new investment manger Todd Combs have been up to.

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Not Phased
Berkshire's newest unexpected investment was in discount retailer Dollar General (NYSE:DG), with Berkshire buying around 1.5 million shares in the company. Shares in DG were up nearly 5% on the news. Yet this investment is no new insight to value investors. Activist investor Bill Ackman of Pershing Square had previously disclosed a sizable stake in competitor Family Dollar (NYSE:FDO). The long-term outlook for these retailers seems to be solid, with U.S. consumers likely to remain very price sensitive for the foreseeable future. And discount retailers prices are just as good if not even better than Wal-Mart prices. Many of them have multiple locations closer to consumers than the nearest Wal-Mart. DG shares currently trade for $34 or about 13 times forward earnings. Dollar General will report earnings on August 30 and analysts are predicting earnings growth of 15%, which may prove conservative.

Buy What You Know
Berkshire also added more to its existing stake in MasterCard (NYSE:MA) and Wells Fargo (NYSE:WFC). Both Buffett and Combs are very familiar with these companies and took the opportunity to buy more of what they already know and like. Interestingly, when the markets sold off last week, Wells Fargo fell below $23 and MasterCard fell below $290. Since the current 13F only reveals equity purchases as of June 30, 2011 I would not be surprised if Berkshire bought more of WFC and MA. Buffett did make a comment that he bought more stocks last week than at any other point in time in the prior year.

Wells Fargo today trades for $24 and change, lower than the average price during the second quarter. So investors interested in the company are paying less per share than Berkshire's cost to buy in the second quarter. With shares trading for less than 10 times earnings and yielding 2%, the valuation seems quite attractive.

The Bottom Line
For investors, the big takeaway is that when stock prices of businesses you know and admire go on sale, that is the time to buy. (For additional reading, take a look at Think Like Warrent Buffett.)

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