Warren Buffett’s High Upside Potential Picks Include GM

Page 1 of 2

In mid February, Warren Buffett’s Berkshire Hathaway filed its 13F with the SEC, disclosing many of its long equity positions as of the end of December 2012. This information is a bit old, but we have found that even with the delay in 13F filings the most popular small cap stocks among hedge funds generate an average excess return of 18 percentage points per year (learn more about our small cap strategy) and of course Buffett is a long term investor so Berkshire likely still owns most of these stocks. The PEG ratio combines the P/E multiple and analyst expectations for earnings growth in a single quantitative metric, and so can be one way to measure a stock’s upside potential if the analysts turn out to be correct. Here are five stocks which Berkshire owned at the end of December with five-year PEG ratios less than 1 (or see the full list of stocks Buffett reported owning):

During the fourth quarter of 2012 Berkshire increased its holdings of DirecTV (NASDAQ:DTV) by 15% to a total of over 34 million shares; this represented over $1.7 billion invested in the company at that time. DirecTV’s earnings grew strongly in the fourth quarter of 2012 versus a year earlier, and while revenue growth was more limited the stock is fairly cheap at 13 times trailing earnings. Analyst expectations imply a five-year PEG of 0.7. Billionaire Mario Gabelli’s GAMCO Investors was another major shareholder of DirecTV, reporting a position of 4.8 million shares (research more stocks Gabelli likes).

Warren Buffett Coca-Cola Company (KO)Buffett and his team kept their holdings of Philips 66 (NYSE:PSX), a $43 billion market cap downstream oil and gas company recently spun out from ConocoPhillips (NYSE:COP) constant between October and December. Many value investors like investing in spinouts because management of the new company may be better able to focus on operations without having to concern themselves with the needs of the larger organization (read more about investing in spinouts). Currently Phillips 66 trades at 11 times trailing earnings and 10 times analyst consensus for 2014, though reported financials have been down.

Read on for three more stocks Buffett likes:

Page 1 of 2
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 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

The Most Successful Reality TV Stars

Cheapest Cities to Visit in the US

Most Expensive Summer Camps

Most Expensive Animals in the World

Most Expensive Specialty Crops in the World

Movies That Took Ages to Make

The Longest Hollywood Films Ever Made

Most Expensive Concert Stages

The Richest Bands of all Time

10 Most Corrupt Countries 2013 List

10 Countries with the Highest Quality of Life Index

Most Expensive Mattresses in the World

5 Smallest Countries by Land Area

The Ultimate Heartbreak Songs

Richest Teenagers in the World

10 Most Haunted Places in America

10 Best Places to Retire in Florida East Coast

Top 10 Places to See Before You Die

Top 8 Countries in the World Where Justice Prevails

10 Richest States in America

15 Wealthiest Countries in the World

Richest Singers in the World

Most Expensive Tasting Menu in New York City

Most Expensive Baby Items in the World

Most Expensive Hotel Suites in Vegas

Most Expensive Brunch in New York City

Most Expensive Beef Cuts in the World

25 Best Colleges to Get a Job

Top 10 US Supermarkets

The 25 Most Dangerous Cities in the World to Visit

Most Expensive Xbox Games

Top 11 Cities Where Billionaires Live

Top 10 Most Charitable Companies in America

Most Expensive Seafood in the World

The 10 Wildest Conspiracy Theories

The 10 Best Job Markets in the US

Top 10 Accounting Scandals of All Time

The 25 Biggest Cities in the World

Top 10 Best Paying Virtual Jobs

Most Expensive Leather Shoes in the World

Top 6 Things to Buy in March

The 10 Most Stressful Jobs in America – 2014 List

Top 10 Jobs for Introverted People

Top 10 Honeymoon Destinations in the World

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!