CVS Caremark Corporation (CVS), Johnson and Johnson (JNJ): Should You Buy Stocks Discarded By Warren Buffett?

Page 1 of 2

You may know the phrase “….. our favorite holding period is forever,” part of a famous line uttered by mega-billionaire investor and philanthropist Warren Buffett. However, occasionally, stocks that are part of the portfolio of his holding company Berkshire Hathaway Inc. (NYSE:BRK.A) are sold off, or the stake is reduced. It is done mainly to free up funds for other stocks that Mr. Buffett or his investment managers think are more worthy. After all, there isn’t an unlimited supply of money.

Warren Buffett portrait

While much of Berkshire’s value and earnings are derived from owning outright entire companies, like Geico Insurance and BNSF Railroad, some still is based upon the value of publicly traded businesses in the portfolio.

Berkshire Hathaway Inc. (NYSE:BRK.A) investment team, including Vice-Chairman and long-time Buffett friend Charlie Munger still have to rely on getting good returns from partial ownership in companies. Therefore, they are always on the lookout for good value, not willing to pay too much. To them the price to book ratio is an important stat to look at. The lower the better. This has led to fantastic returns on Berkshire shares in the past, including a gain of about 30% so far this year. Expect the great performance to continue in the future, especially if the recent stock moves pan out.

One of the new stocks purchased with that capital is farm equipment manufacturer Deere & Company (NYSE:DE). High commodity prices, potential growth in farm income, exports to emerging markets and a great management team will benefit the Moline, IL company, better known as John Deere, over the long term. So far Deere has been a slow starter in the portfolio, down about 2% this year, way behind the overall market. The company has been growing, albeit slowly, recently. Expect that to pick up in the future. Over the long term Deere & Company (NYSE:DE) will probably fit in nicely in and become a solid performer for Berkshire.

Are any of the stocks Berkshire discarded worth looking at for your own portfolio?

Flight from pharmacy and medicine

One of the holdings liquidated was that of the pharmacy giant CVS Caremark Corporation (NYSE:CVS). Shares purchased in 2011 at average prices between $32 and $38 were sold off between roughly $43 and $48 about a year later, a much shorter period than “forever”. The current price for the stock is around $59.

Maybe Berkshire should have been held onto CVS Caremark Corporation (NYSE:CVS) a bit longer. The company is a big player in a high growth industry. The primary drivers for expansion will be generic drugs, the corporate benefits business, and in-store clinics. The company has over 7,000 stores now and more are planned to be opened. There is plenty of momentum in its favor, as the stock is up 22% year to date, exceeding both Deere and the overall market.

Another company that is still part part of the Berkshire family, though the stake has been pared down substantially, is medical device and drugmaker Johnson and Johnson (NYSE:JNJ).

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

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 Businesses to Invest In

Top 5 Things You Might Be Doing Wrong With Your Business

Top 5 Strategic Technology Trends in 2014

Top Rags to Riches Stories

Parenting Behavior That Promotes Future Leaders

Top 5 Mistakes Made by Small Businesses

Top 5 Most Common and Potentially Devastating Financial Blunders

Top 5 Highest Paying Jobs for Web Designers

Top 6 Most Respected Professions that Also Pay Well

Top 5 Pitfalls Investors Should Avoid

Top 6 Lawyers and Policy Makers Under 30

Top 6 New Year’s Resolutions for Entrepreneurs

Top 7 Locations to Check in on Facebook

Top 5 Mistakes made by Rookie eBay Sellers

Top 7 eBook Publishers in 2013

Top 6 Health Industry Trends in 2014

5 Lessons for Entrepreneurs from Seth Godin

Top 5 Success Tips from Jordan Belfort – the Wolf of Wall Street

Best Master’s in Finance Degree Programs

Top 6 Earning Celebrities Over 50

The most expensive sports to play

Top 7 Earning Celebrities Under 25

Best 7 Online Courses to Take: Free Finance MOOCs

Top 6 Bad Habits that Promote Failure

20 Most Valuable Soccer Teams in the World in 2013

12 Most Expensive Countries for Foreign Students

Top 30 Most Influential Women in the World

Top 20 Most Expensive New Year Eve Shows

Top 5 Best Vocational Careers

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!