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

Biotech Insider Alert - $6 Stock To Hit $40

$200 Million Dollar Healthcare Hedge Fund's #1 Best Idea Right Now

The best healthcare hedge fund out there right now is one of the largest shareholders in this biotech stock. The fund returned more than 20% in each of the last 2 years with a virtually fully hedged portfolio, and it's sending out a BUY signal on this biotech stock. Get your FREE REPORT today (retail value of $300)

This is a FREE report from Insider Monkey. Credit Card is NOT required.
Click here to Read Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 74 percentage points in 2.5 years. Our beta is only 1.2 (download a FREE newsletter and see the details inside)

Lists

Best Selling Magazines in the World

Shortest People in History

The Most Celebrated Holidays in the World

Most Expensive Handbag Brands in the World

Top Selling Comic Book Issues of this Century

The Most Powerful Women in Politics

Best Paid DJs

Most Rebellious Female Artists

Best Paid TV Actresses of 2014

Best Paid Actors of 2014

Most Expensive Horses in the World

Tallest People Ever

Most Encouraging Feminist Celebrities

Best Paid Supermodels of 2014

Top 10 Suburbs for Retirement in 2015

10 Wealthiest Cities in America

Top 10 TED Talks for Entrepreneurs

Best TED Talks on Education

25 Most Dangerous Places to Live in America

Top 10 Ski Resorts in the United States – 2014 List

Top 10 Most Remote Places in the World

Most Visited Museums in the United States

Wealthiest Photographers in the World

Most Famous Gay Athletes

The World’s Most Famous Circuses

Best Hair Stylists

Most Popular NASCAR Drivers

The Best Romance Movies of all Time

The Most Wanted Drug Lords

The Oldest Money Managers

The Greatest Directors in the World

Largest Animals in the World

World’s Most Expensive Desserts

Best Selling Comic Books of All Time

A-list Actors who Sabotaged Their Career

Rappers With a College Degree

The Best Jazz Albums of all Time

The Most Influential Jazz Musicians

The World’s Most Famous Photographers

The Best Oscar-Winning Songs

Most Influential Choreographers Ever

Most Expensive Department Stores in the World

The Most Expensive Stolen Paintings in the World

The World’s Most Expensive Teas

Top Oscar Record Holders

The Most Expensive Flowers in the World

Countries With a Booming Film Industry

Most Expensive Cupcakes in the World

Uncommon European Escapes

The Most Stolen Artists in History

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 129% in 2.5 years!! Wondering How?

Download a complete edition of our newsletter for free!