Four Warren Buffett Favorites You Ought To Own: International Business Machines Corp. (IBM), Wells Fargo & Co (WFC)

Page 1 of 2

Warren Buffett Coca-Cola Company (KO)It may seem improbable that a $24.1 billion year-over-year profit would be called “subpar,” but that is exactly what Warren Buffett lamented in his 2012 annual Berkshire Hathaway Inc. (NYSE:BRK.A) shareholder letter dated March 1, 2013.

Berkshire Hathaway returned 14% last year compared to the 16% gain logged by the Standard & Poor’s 500 Index. Berkshire’s mushrooming portfolio and mammoth size is making it difficult to keep up with the market, something Buffett has warned about in the past.

In addition, Berkshire’s cash stash, some $47 billion at the end of 2012, sat idle. While Buffett had been on the prowl for a sizeable acquisition last year, nothing met the investment guru’s discerning criteria. However, early this year Berkshire agreed to buy H.J. Heinz for $23.4 billion with Brazilian buyout firm 3G Capital. Buffett and his astute team of money managers continue to look for deals. “Charlie (Vice Chairman Charlie Munger) and I have again donned our safari outfits and resumed our search for elephants,” Buffett recently said.

Even after the Heinz deal, there is plenty left in Berkshire’s bank account for several noteworthy deals and stock purchases.

Berkshire’s shareholder letter revealed some notable increases to its portfolio positions, including increasing its stake in American Express Company (NYSE:AXP), The Coca-Cola Company (NYSE:KO), International Business Machines Corp. (NYSE:IBM) and Wells Fargo & Co (NYSE:WFC). Buffett said he plans to boost his stake further in the four companies.

Here’s why Buffett likes the bunch and why you should too.

American Express is a buy for growth and value. The credit card company that targets affluent members emerged from the Great Recession with solid returns. In the past four of the last five quarters AXP posted earnings that beat expectations. A longtime holding of Buffett’s, American Express cardholders tend to make larger purchases and pay them off on time, leaving AXP less vulnerable to credit card default. With a P/E of roughly 16, AXP shares look less expensive than rivals Mastercard, with a P/E of 23, and Visa, with a P/E of 72. As the economy continues to recover, look for AXP to benefit.

Coca-Cola has been and remains a mainstay in Berkshire Hathaway’s portfolio. Buffett admits to downing five cans of Cherry Coke daily. Coke’s business is one that is easy to understand, a priority for Buffett. In addition, it has a great product, another must for Buffett. Coke is one of the most recognizable brands in the world. The Atlanta-based company continues to diversify, adding a bevy of beverages to whet ever-changing palates. Coke has given shareholders a sugar rush for more than 51 years thanks to its more than half century record of raising dividends. Shares yield a sweet 2.89%.

International Business Machines Corp. (NYSE:IBM) is the second largest U.S. firm in terms of number of employees, the fourth largest in terms of market cap, the ninth most profitable, and the 19th largest in terms of revenue, according to the latest ranking by Fortune. Globally, the company sits at the No. 31 spot in terms of revenue. The Armonk, NY based company plans to spend about $20 billion on acquisitions by 2015, and will spend roughly $35 billion on research and development. Those moves will keep International Business Machines Corp. (NYSE:IBM) a cutting edge company and cement its position as a worldwide technology and consulting leader.

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. Our beta is only 1.2 (don't click this link if beating the market isn't important to you).

Lists

On the Move: The 10 Fastest Growing Businesses in 2015

Fast Money: The 10 Highest Paying Fast Food Restaurants

Mixing It Up: The 14 Best Music Mashups of 2014

Rito Pls Buff: The 10 Least Played Champions in LoL Season 4

10 Covers of Popular Songs that are Better than the Originals

Must See TV: The 9 Most Anticipated Shows of 2015

The 15 Biggest Box Office Bombs of All Time

10 Things The World Can’t Stand About Americans

Picture Perfect: The 6 Smartphones with the Best Cameras

The 10 Best Countries To Work In the World

A Profitable Day At The Track: 5 Tips For Betting On Horses

Tearing You Apart: 6 Bad Habits That Ruin Relationships

Learning on the Job: The 6 Biggest Mistakes Parents Make

Shopaholics Rejoice: The 12 Biggest Malls in the World

Fright Night: 10 Horror Movies Based on True Stories

Mach Mania: The 10 Fastest Jets in the World

Military Heavyweights: The 10 Countries with the Most Tanks

All In: The 7 Richest Poker Players in the World

Abracadabra: The 10 Best Magicians in the World

The 10 Richest Asian Countries in the World in 2014

Eyes in the Sky: 10 Things You Need to Know About Drones

Rising Stars: The 6 Best Silicon Valley Startups

Military Muscle: The 5 Most Advanced Armies in South America

All that Glitters: The 7 Most Luxurious Jewelry Brands in the World

5 Things You Didn’t Know About ISIS but Should

Empowering Your Money: The 5 Best Energy Stocks to Invest In

The 11 Best Android Apps You Can’t Get on iOS

The 10 Most Important International Conflicts in 2014

Mood Enhancers: The 20 Most Uplifting Songs of all Time

Lover Beware: The 8 Countries that Cheat the Most

Breath of Fresh Air: The 25 Countries with the Best Air Quality on the Planet

Singles Beware: The 8 Worst Mistakes Made on First Dates

Healthy and Happy: The 10 Countries with Lowest Healthcare Costs

The 6 Best Company Team Building Activities to Build Workplace Camaraderie

Ships Ahoy: The 10 Busiest Shipping Ports in the World

10 Productivity Tips to Save You Time and Help You Do More With Less

Grab a Bite: The Most Popular Fast Food Restaurants in America

Friday Night Thirst: The 10 Most Popular Cocktails in the World

The 6 Greatest Unsolved Mysteries We May Never Figure Out

7 Useless Products You Never Should’ve Bought

The 5 Reasons Why You’re Single and Miserable

The 7 Most Addictive Foods in the World We Can’t Stop Eating (Even Though We Should)

5 Amazing Places You Can Swim with Dolphins

The Top 7 Most Livable Countries In The World

The 10 Most Expensive Baseball Cards Ever Pulled From A Pack

The 5 Easiest Second Languages to Learn for English Speakers

Silver Spoon: The 6 Richest Families in the World

The 20 Countries with the Largest Prison Populations in the World

The Top 10 Richest Actors in the World

The 10 Best Airline Stocks to Invest In Before They Fly Too High

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!