Genworth Financial Inc (GNW), Bunge Ltd (BG): Do You Own These Potential Buffett Targets?

Notably, a handful or regional banks make the list. The appeal of these banks is in the projected consolidation of the banking industry. The major banks are now too large (in the eyes of regulators) to make more acquisitions. And the smallest banks are being squeezed by a rising tide of regulatory and capital compliance. That puts the mid-size regional banks in the sweet spot, and they will likely look to make accretive acquisitions that bolster their franchises.

Would Buffett look to acquire regional banks? He’s a huge fan (and a major shareholder) of Wells Fargo & Co (NYSE:WFC), but he’s shown little interest in smaller banks thus far.

The remaining group of companies look perfect for Buffett.

In fact, Buffett had been building a growing position in agricultural giant Archer Daniels Midland Company (NYSE:ADM), as I noted in this article.

He subsequently closed that position with a nice profit, and he should now check out rival Bunge Ltd (NYSE:BG), which in my view, holds better value. (I’ll have more to say about Bunge in a separate column in coming weeks).

Lastly, you’ll note that both Reinsurance Group of America and Genworth Financial Inc (NYSE:GNW) appear on two separate tables here, as they both sport high free cash flow yields and trade below tangible book value. Those deep value metrics have surely caught the eye of Buffett and his research team.

Risks to Consider: It’s unwise to buy a stock simply on hopes of a buyout, and the company should instead have appeal on its own intrinsic value.

Action To Take –> Value never goes out of style. Although the current bull market has been especially kind to high-growth stocks, it is value stocks that tend to deliver the steadiest gains for risk-averse long-term investors. These companies all have proven track records, and sport impressive valuations.

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– David Sterman

Warren Buffett’s Top 5 Stocks

Buffett’s firm, Berkshire Hathaway, holds dozens of stocks. But these five make up 75% of its portfolio… worth $65 billion. Click here to get Buffett’s top 5 stocks plus his 16 latest buys, FREE.