What the Investing Masters are Buying
By James Altucher
Stockpickr.com

It's that time of the year again when famed investors - from Warren Buffett to Carl Icahn to T. Boone Pickens -- have updated their quarterly filings in which they must disclose their stock holdings.

First off, it's generally useful to follow the picks of these masters. Why? They've likely done serious research, have a proven track record and are usually long-term investors, so you don't have to worry that they'll be "pumping and dumping."

Despite the turmoil in mortgages that started earlier this year, Buffett has been building up positions in banks that don't have a lot of subprime exposure but have been pummeled nonetheless.

Buffett announced a new nine million-share position in Bank of America (BAC) worth $425 million. Bank of America has $1.5 trillion in assets, trades at nine times earnings and has a dividend yielding 5%.

Buffett also added to his position in US Bancorp (USB). The bank is in the fortunate position of having such little exposure to subprime that the average credit quality of its customers actually increased year over year. US Bancorp, which pays a generous 4.9% yield, has paid a dividend without fail since 1863.

Icahn just initiated new positions in Alcoa (AA) and Alcan (AL). Both trade at about six to seven times operating earnings and are considered takeover targets. With the Federal Reserve debating a series of rate cuts in the near future, these stocks and other metals plays stand to gain the most as the economy re-stimulates, the housing bust hopefully ends, and metals prices rise with potential inflation.

Icahn is making a double-edged bet: either these companies get taken over, or prices rise as the economy revives.

KBR Inc. (KBR), a recent Halliburton spin-off, is a new position for T. Boone Pickens, according to his latest quarterly filing. KBR, whose profits jumped 52% in the last quarter, is a play on defense, oil and global infrastructure. You can think of it as a "conflict" stock. New KBR contracts include everything from providing food and shelter for soldiers in Iraq to building a new petrochemical facility in Saudi Arabia.

Lampert increased his holdings in Citigroup (C) in the last quarter. Lampert, the CEO of Sears Holdings, is betting that the stock has sold off too much in the mortgage fiasco, and he may also be betting that CEO Chuck Prince is on his way out, a catalyst that many assume will boost the stock.

Soros initiated a new position in the semiconductor ETF, Semiconductor HOLDR (SMH). He also picked up shares of Texas Instruments (TXN). Some speculate that Texas Instruments is providing power management chips for the Apple iPhone but regardless, the continued miniaturization of chips in ever-smaller gadgets have increased the need for the type of power management chips that Texas Instruments specializes in. And at 9.5x operating earnings and with $3.5 billion cash in the bank with no debt, Texas Instruments is certainly here for the long run.

Soros also sees opportunity in the financials, having initiated a new position in Lehman Brothers (LEH) over the last quarter. Lehman has fallen even harder than Bear Stearns. People are worrying about what exposure might exist in its $80 billion worth of mortgage securities that it currently holds. Last Wednesday, Lehman shut BNC Mortgage, its subprime landing unit.

I'm not worried at all about Lehman shuttering the subprime unit. Its P/E is just seven and revenue and earnings are expected to rise. Soros is betting that one of the best run investment banks is going to make it out of this mess just fine.

For the full view of the top holdings of each of these super investors, please check the links to the right.

James Altucher is founder and CEO of Stockpickr.com, author of the book "Trade Like Warren Buffett" and partner at Formula Capital.