Billionaire Warren Buffett’s Big Changes: Johnson & Johnson (JNJ), General Motors Company (GM), Archer Daniels Midland Company (ADM)

Page 1 of 2

Billionaire investor and Berkshire Hathaway founder Warren Buffett is a pupil of legendary investor Benjamin Graham. Berkshire is a major conglomerate investing in a number of companies across a number of industries, focused on acquiring great companies at a discount to intrinsic value. Since Buffett is one of the world’s top investors, I found it useful to take a look at what Buffett and Berkshire were buying and selling during the fourth quarter (see all of Buffett’s new picks).

hedge funds vs. mutual fundsBuffett sold off…

Berkshire dumped 34% of its stake in Johnson & Johnson (NYSE:JNJ) during the fourth quarter. Johnson & Johnson pays a decent dividend yield at 3.2%, but its 60% dividend payout ratio is not quite as appealing. I generally look for a dividend payout of less than 50% to ensure a company can remain flexible during economic downturns. Valuewise, Johnson & Johnson (NYSE:JNJ) has a PEG of 3.0; anything above 2.0 is considered expensive.

For fiscal 2013, Johnson & Johnson (NYSE:JNJ) forecasts earnings to come in between $5.35 and $5.45 per share, but analysts’ consensus calls for $5.50. This lowered guidance includes a $0.25 hit from U.S. health-care reform. The company, which makes drugs, health-care products, and medical devices, should still see supply issues due to its product recalls and suspension of manufacturing at its Fort Washington plant. The company doesn’t expect that site to be ready for the FDA certification review process until late 2013 (see more about why J&J is heavily shorted).

Boosting Stakes In…

Berkshire added to its General Motors Company (NYSE:GM) stake, upping its shares by 66% and elevating the car company to thirteenth in Berkshire’s portfolio. GM is also one of billionaire David Einhorn’s top bets (read more about Einhorn’s picks). General Motors Company (NYSE:GM) plans to increase its North American capital expenditures to $1.5 billion in 2013, spending more on plant expansions. It hopes to lift profit margins in the region to 10% in the next three or four years, from 8% currently. The company is also hoping for break-even results in Europe by 2015.

General Motors Company (NYSE:GM) has a solid growth outlook, with Wall Street expecting it to grow EPS at 15%. Couple this with the car maker’s forward P/Eof 8, and it appears the company is a solid growth-at-a-reasonable-price opportunity, with a PEG of 0.5. The company is also turning around its profitability from an operating margin standpoint — with a five-year average operating margin of a negative 1.5% — but the company has a trailing-12-month operating margin of 0.4%.

Buffett boosted its stake in DIRECTV (NASDAQ:DTV) to 34 million shares, an increase of 15% from its Q3 stake, now being Berkshire’s eighth-largest holding. Latin America is expected to be a major growth story for the company in the coming years, and it is also looking to focus on a more premium brand, targeting high-end customers that are willing to pay for its costly interactive services and premium programs.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

Best States To Practice Medicine

The 10 Best States to Have a Business

The 12 Most Expensive Apple (AAPL) Apps in the Market

The 10 Richest Billionaires in the World

10 Biggest Kickstarter Failures

The 10 Best Places to Work At

The Top 10 of Google Inc (GOOGL)’s Most Expensive Acquisitions

13 Best Cities to Visit in South America

10 Most Expensive Works of Art of All Time

The 10 Richest Banks in the World

The 10 Best-Paying Jobs in America (2014)

7 Most Expensive Foods in the World

The World’s Top 10 Earning Authors

Five Wicked and Very Expensive Items (and Other “Stuff”) Sold on eBay

10 Biggest Celebrity Bankruptcies

The Top 10 Highest Paid CEOs in 2014

The 10 Most Expensive Real Estate Cities in America

10 Most Expensive States To Live In America

The 10 Best Airlines in the World

The 10 Best-Selling Cars in 2014

The 10 Best Industries to Invest In

The 10 Most Expensive States to Own a Car In

Top 10 Business Schools in US: 2014 Rankings

Top 20 Female Billionaires in 2014

6 Movies That You Should Watch to Better Understand The Cold War

Top 15 Best Paying Jobs for Women in 2014

Top 6 Things Rich People Do Differently Every Day

5 Retirement Mistakes To Avoid (and Einstein’s Famous Quote)

11 Smartest People in the World

6 Films About the Financial World You Need To Watch (While “The Wolf” is Not Around)

Warren Buffett and Billionaires Are Crazy About These 7 Stocks

The Top 10 States With Fastest Internet Speeds

10 Best Places to Visit in USA in August

Top 10 Cities to Visit Before You Die

Top 10 Genetically Modified Food In the US

15 Highest Grossing Movies Opening Weekend

5 Best Poker Books For Beginners

10 Strategies Hedge Funds Use to Make Huge Returns

Top 10 Fast Food Franchises to Buy

10 Best Places to Visit in Canada

Best Summer Jobs for Teachers

10 Youngest Hedge Fund Billionaires

Top 10 One Hit Wonders of the 90s

Fastest Growing Cities In America

Top 10 U.S. Cities for Freelancers

Top 9 Most Popular Free iPhone Apps

Top 10 Least Expensive Private Business Schools in the US

Top 15 Most Expensive Countries in the World – 2014

Top 6 Tax Scams and How to Protect Yourself

Top Businesses to Invest In

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!