Buffett Loves International Business Machines Corp. (IBM), The Coca-Cola Company (KO), and The Procter & Gamble Company (PG)

Page 1 of 2

Instead of wondering who will become the next CEO of Berkshire Hathaway Inc. (NYSE:BRK.A) or what Warren Buffett wrote in his first tweet I think most investors, including me, would be more interested in the answers to questions like what companies he chooses and how he chooses them.

Q&A

The annual Berkshire shareholders meeting was held earlier this month, a “small” affair attended by 35,000 of the faithful in Omaha, Nebraska.

In addition to providing various financial information, it featured a five hour long question and answer period where Warren Buffett and Vice-Chairman Charlie Munger tried to impart their collective investing wisdom onto the masses.

Working together for nearly a half century, Buffett and Munger have identified companies ripe to be acquired at reasonable prices and brought into the Berkshire Hathaway Inc. (NYSE:BRK.A) stable, as well as individual stocks that have returned tons of value to shareholders.

The result has been fantastic. Over the last 13 years there has been a three-fold increase in Berkshire’s stock price while the overall market has been relatively flat.

Some of the companies Berkshire owns outright include GEICO, NetJets, Benjamin Moore, Burlington Northern Santa Fe, and Fruit of the Loom.

Warren Buffett always said that the minimum holding period for a stock should be “forever.” He looks for companies that do not trade much above their book value and keeps them as long as they keep delivering value.

Three stocks that made the grade, and remain part of Buffett’s widely diversified portfolio today, are The Coca-Cola Company (NYSE:KO), International Business Machines Corp. (NYSE:IBM) and The Procter & Gamble Company (NYSE:PG).

This Coke is for you

Coca-Cola Company (NYSE:KO)The Coca-Cola Company (NYSE:KO) stock was first purchased by Mr. Buffett in 1988, and factoring in reinvested dividends it has gained more than 1,000% since.  That’s almost double the overall market, although only half of the gain of Berkshire.
Part of the company’s success derives in part from great product recognition and a very wide economic moat. Who hasn’t heard of Coke? It is the world’s best-known and valuable brand, and is consumed in the vast majority of countries today.

Add in a great management team, lots of cash flow and a relatively inexpensive valuation compared to its peers and you get solid performance. You can’t go wrong owning Coke.

Speaking of dividends, The Coca-Cola Company (NYSE:KO) has been ratcheting them up every year for about half a century. Over the past 35 years each shareholder has collected a total of $29,300 for every $1,000 initially invested. Based upon its earning power and cash flow the company should be able to keep increasing them in the future.

Inventive technology

When talking about International Business Machines Corp. (NYSE:IBM), Mr. Buffett says he doesn’t care if the share price actually goes up. He is content reaping rewards from the company stock buyback efforts. If the price remains where it is or lower the company spends less money when repurchasing shares on the open market. That means more money for investors like Mr. Buffett.

Since 2000, International Business Machines Corp. (NYSE:IBM) has lowered its share count by a third, in the face of sluggish revenue growth. The remaining shares are now worth more and EPS has increased as the result.

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.
Comments
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

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

Best Travel Destinations in Australia

World’s Most Expensive Musical Instruments

World’s Most Famous Animals

Most Expensive Cakes in the World

Most Expensive Kosher Champagne in the World

Most Expensive Kosher Wine in the World

The Most Surprisingly Dark Fairy Tales

Most Popular Travel Destinations in Asia

The 10 Most Expensive Dresses Ever Worn to the Oscars

World’s Most Visited Art Museums

Best Countries for Photographers to Work in

Best Paid Jobs in the Film Industry

The Most Renowned Recovered Paintings Ever

Child Stars That Turned out Just Fine

Books That Were Banned in the Past Century

World’s Richest Dancers

Best Remedies against Bad Breath

Foods That Improve Your Skin Texture

Best-Selling Children’s Books of all Time

Foods That Boost Your Libido

Best-Selling Books of all Time

The Most Expensive Academy Awards Jewelry in History

Most Expensive Japanese Restaurant In New York City

The Best B-Boy Movies

Most Awesome Hip Hop Documentaries

Foods That Stain Your Teeth

Richest Doctors in the World

The Best Movie Sountracks Ever

The Highest Grossing Musicals on Broadway

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!