7 “Warren Buffett shares” to buy
These seven actions correspond to Warren Buffett’s playbook. The following “Warren Buffet stocks” have all the properties of an excellent long term …
These seven actions correspond to Warren Buffett’s playbook.
The following âWarren Buffet Sharesâ all have the properties of excellent long-term investments, except that the world-famous investor does not yet have them. Over the course of his career, Buffett has curated a successful and streamlined investment thesis based on a simple adage: buy low, hold long, and sell high. Buffett focuses on business models he can easily understand and concentrates 85% of his holdings in three sectors: consumer staples, information technology and financial services. Within these industries, Buffett believes that broad economic moats and strong brands isolate companies from competition and generate consistent cash flow. Commonly, Berkshire Hathaway Inc. (teleprinter: BRK.A, BRK.B) never paid a dividend, instead reinvesting the profits. However, for stocks owned by Buffett, he sees dividends as a way for companies to reward long-term shareholders. With those themes in mind, here are seven stocks that look like perfect additions to Buffett’s stock portfolio.
EstÃ©e Lauder Cos. Inc. (EL)
Founded in 1946, EstÃ©e Lauder manufactures and sells premium beauty products around the world, including well-known brands such as Aveda, Clinique, Michael Kors and Tom Ford Beauty. Buffett believes that powerful global brands generate consistent revenue, and this vast collection of prestigious names allows EstÃ©e Lauder to maintain pricing power with its customers, helping to offset rising raw material costs or spending. ‘exploitation. In addition, EstÃ©e Lauder has a solid track record of successful acquisitions. Earlier this year, the company increased its investment in fast-growing DECIEM Inc. from 29% to 76% and agreed to buy the remaining stake in three years. With cash reserves of nearly $ 5 billion, expect EstÃ©e Lauder to continue to aim for accretive acquisitions that will increase market share over the long term. In fiscal 2021, net profit increased 320% after falling 62% the previous year. EstÃ©e Lauder stock has risen about 47% in the past year.
CSX Corp. (CSX)
Berkshire Hathaway has acquired 77% of the Burlington Northern Santa Fe Corp rail carrier. which it did not yet hold for $ 26.3 billion in 2010. Buffett saw the deal as a “global bet on the economic future of the United States”. CSX has more than 20,000 miles of track east of the Mississippi River, forming a stranglehold on rail networks in the eastern United States. Inefficient ports and trucker shortages were headwinds, but the recently released third quarter results were a home run. The company posted net income of $ 968 million and revenue of $ 3.29 billion, beating analysts’ expectations, while lowering its operating ratio by half a percentage point. âManagement’s focus on operations has resulted in improved service as well as strong margins,â writes Walter Spracklin, RBC analyst. Going forward, RBC expects positive rail industry fundamentals to “drive long-term growth in free cash flow.”
Campbell Soup Co. (CPB)
Campbell Soup manufactures packaged foods and over its 152 year history has developed and acquired strong brands such as Prego, V8, Swanson and Pepperidge Farm. Buffett likes it sector, and Berkshire owns a 26.6% stake in competitor Kraft Heinz Co. (KHC), although he now regrets that he has paid too much. For Campbell, the pandemic-induced drop in the soup bonanza has been harsh. Fiscal fourth quarter results saw net sales decline 11%, and management expects profits to decline slightly in 2022. CPB is down more than 14% in 2021 so far, but it is ‘is perhaps the lowest point. Morningstar gives Campbell a broad economic rating “resulting from brand intangibles and cost advantage.” Morningstar gives a fair value estimate of $ 48.50 for the CPB stock, and the stock closed at $ 40.19 on October 28, implying a significant rise.
JPMorgan Chase and Co. (JPM)
During the pandemic, Buffett gave up many of his bank holdings, including Goldman Sachs Group Inc. (SG), JPMorgan and Wells Fargo & Co. (WFC). Today he might be kicking himself. JPMorgan is the gold standard for bank stocks and offers a full range of services, from checking accounts to wealth management to investment banking. Morningstar has attributed a wide economic gap to JPMorgan due to its sustainable cost advantages and leadership position in nearly every area where it competes, allowing it to benefit from unmatched scale and reach in the States. United Third-quarter results were driven by its corporate and investment banking division, posting net income of $ 5.6 billion on total revenue of $ 12.4 billion. Additionally, within JPMorgan’s Consumer and Community Banking division, debit and credit card sales volume increased 26% and average deposits increased 20%. Over the past year, JPM stock has risen by around 75%.
Square Inc. (SQ)
Buffett also has a soft spot for financial services companies such as American Express Co. (AXP) and Moody’s Corp. (AGC). Founded in 2009 by Twitter Inc. (TWTR) co-founder Jack Dorsey, Square is a payments company famous for its white square credit card readers and peer-to-peer payment system, Cash App. Like many growth-oriented technology companies, Square does not pay a dividend, but instead chooses to reinvest its profits in growth initiatives. In early August, Square announced that it had reached a $ 29 billion deal to acquire Afterpay, an Australian buy-back, later-payout, or BNPL platform. After the acquisition, Square plans to integrate the Afterpay platform into its credit card readers and Cash app, allowing even the smallest merchants to offer BNPL and installment payments. Square cites a total addressable market of $ 100 billion for sellers and $ 60 billion for customers and estimates that it has only tapped 2-3% of the market, implying high upside potential and low long-term value creation.
Metlife Inc. (MEET)
Buffett likes insurance companies because they generate cash at low cost and are a relatively stable defensive industry. Founded in 1868, Metlife provides insurance and financial services to individuals and institutions. Insurance companies have a business model – collecting costs, investing them in asset appreciation, then paying claims – that allows them to benefit when interest rates rise. In the second quarter of 2021, premium and fee income was $ 11.2 billion, up 7% from the same period in 2020, and investment income increased 29% to $ 5.3 billion. With COVID deaths on the decline and total employment expected to rise, Metlife expects to pay fewer life insurance claims and add members to its group plan. Additionally, Metlife authorized $ 3 billion in share buybacks in August, implying the company believes the market is undervaluing the stock.
Mohawk Industries Inc. (MHK)
Mohawk Industries manufactures flooring for residential and commercial customers. With a market capitalization of over $ 13 billion, it is the world’s largest player in flooring and maintains leadership positions in carpet, tile and hardwood products. Although Mohawk posted negative revenue growth for 2020 and 2019, the past four quarters have been a reversal of that trend, and revenue grew 44% in the fiscal second quarter. In terms of operational efficiency, EBITDA margins – earnings before interest, taxes, depreciation and amortization – have improved for five consecutive quarters. JPMorgan expects “a new lead for [operating] margin improvement over the next 1-2 years. With material sourcing and labor availability proving difficult, Mohawk committed $ 650 million in new capital investments to ease manufacturing constraints. Mohawk also has a price-to-earnings ratio of around 13, below the industry average, and its stock price has more than doubled in the past year.
Seven âWarren Buffett sharesâ to buy:
– EstÃ©e Lauder Cos. Inc. (EL)
– CSX Corp. (CSX)
– Campbell Soup Co. (CPB)
– JPMorgan Chase and Co. (JPM)
– Square Inc. (SQ)
– Metlife Inc. (MEET)
– Mohawk Industries Inc. (MHK)
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