3 Companies Buffett Might Buy: Archer Daniels Midland Company (ADM), General Dynamics Corporation (GD) and More

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Would Buffett pair his Heinz buy with a McCormick (NYSE:MKC) purchase?
Like H.J. Heinz Company (NYSE:HNZ), McCormick & Company, Incorporated (NYSE:MKC) is a well-known, staple food brand. In fact, shares of McCormick have rallied in virtually every session since Buffett bought Heinz just a couple weeks ago.

Buffett certainly could afford McCormick — its market cap is only $9 billion. Further, it operates a type of business Buffett has an affinity for.

The problem lies in the fact that McCormick isn’t really a cheap stock. Its PE ratio of 22.50 means it’s relatively more expensive than the S&P 500, although its price-to-book ratio of 5.30 is nearly identical to Coke’s 5.28.

A high PE ratio isn’t necessarily a deal breaker for Buffett; after all, he owns about $400 million worth of Costco Wholesale Corporation (NASDAQ:COST) shares (PE over 25). But, if he’s interested in McCormick, that would likely be a major detrimental factor.

Should investors try to front-run Buffett?
Buying a stock simply on the hopes that the company will be acquired might not be the best investment strategy (Jim Cramer strongly recommends investors avoid it).

That said, if investors believe that Buffett would be interested in the company, perhaps it’s a worthy investment in general. Buffett has amassed his fortune by buying up cheap, boring companies. Archer Daniels Midland, General Dynamics and McCormick might not be the flashiest investments, but over the long haul, they could be the type of stocks that produce Buffett-like returns.

The article 3 Companies Buffett Might Buy originally appeared on Fool.com and is written by Joe Kurtz

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