What Stocks Are in Buffett’s Annual Letter? – Wells Fargo & Co (WFC), The Procter & Gamble Company (PG)

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There are four stocks that we can call consumer staples. The Coca-Cola Company (NYSE: KO) and The Procter & Gamble Company (NYSE:PG) are classic examples, but Wal-Mart Stores, Inc. (NYSE: WMT) and the Tesco Corporation (USA) (NASDAQ: TESO) are also mass market supermarkets. I hold Tesco, and it is well worth a look for adventurous US investors. It lost its way with a focus on overseas expansion, which caused it to drop the ball in its home UK market. However it is now restructuring and retains a dominant position in the UK.

The evaluation is cheap and it pays a large dividend. Turning to The Procter & Gamble Company (NYSE:PG), this is a company that has found the recession more difficult to manage than most. It has a lot of premium brands, and the challenge has been to defend the pricing of these brands as it was losing market share to competitors with value brands or more innovative companies like Colgate-Palmolive Company (NYSE: CL). In the good old days the recovery would come along and The Procter & Gamble Company (NYSE:PG) would reap the benefits of protecting the value of its brands through the recession, but as we all know the mass consumer market has taken a long time to come back. Nevertheless, the potential to release the value in its brands is significant.

I wasn’t surprised to see Munich Re in the list because there are few people on this earth who know more about the insurance industry than he does, but I was somewhat surprised to see French pharmaceutical giant Sanofi SA (ADR) (NYSE:SNY) on the list. It is certainly a value play (at least I hope so because I hold it), but it also has some competitive risk with a hugely important diabetes franchise, in particular from Novo Nordisk A/S (ADR) (NYSE: NVO).

The situation has been volatile in early 2013. Sanofi has a market leading long acting insulin (Lantus), which is facing competition and patent expiry in the next two years. Originally speculators thought that Novo’s long acting insulin degludec (Tresiba) would receive a positive FDA decision (an FDA committee had recommended it), but the FDA came back asking for more detail. In the meantime, Sanofi’s Lxyumia (type 2 diabetes intended for combination with Lantus) Phase III will not be initiated in 2013. Naturally all of these developments in such a short space of time sent the stocks up and down like a yo-yo.

Putting all of this together, it is quite clear that Buffett is sticking with his value credentials, and it’s a good idea for private investors to follow him with it.

The article What Stocks Are in Buffett’s Annual Letter? originally appeared on Fool.com and is written by Lee Samaha.

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