Yes, You Can Still Invest Like Warren Buffett: The Coca-Cola Company (KO), American Express Company (AXP)

Page 1 of 2

The StressTest column appears every Thursday on Fool.com. Check back weekly and follow @TMFStressTest.

Say that you want to invest like Warren Buffett and naysayers will line up to tell you that you can’t. To a large extent, they’re right.

Buffett’s folksy easy-as-pie investing image doesn’t quite jibe with the usurious deals he’s wrung from the likes of General Electric Company (NYSE:GE)Goldman Sachs Group, Inc. (NYSE:GS). Any average Joe investor can buy stock in GE or Goldman, but only Buffett, with his worth-its-weight-in-gold reputation and the massive Berkshire Hathaway Inc. (NYSE: BRK.A) balance sheet can deal for a double-digit preferred dividend from a financial firm known for ripping its clients’ faces off (so to say, of course).

The recent “partner” deal to buy H.J. Heinz Company (NYSE: HNZ) is no different. While 3G Capital is ponying up $4 billion for common equity in the deal, Buffett and his investors at Berkshire are getting a 9% yield on the $8 billion in preferred that he negotiated.

Try as you might, you can’t invest like that. The best you can do to get those kinds of deals is just invest with Buffett by owning Berkshire.

But while those deals are hardly chump change, they’re still dwarfed by the massive, long-term positions that Buffett maintains in his favorite common stocks. Berkshire has a near-$16 billion position in Wells Fargo & Co (NYSE:WFC) . Another $30 billion is split roughly evenly between The Coca-Cola Company (NYSE:KO) and International Business Machines Corp. (NYSE: IBM). And there’s a further $10 billion in American Express Company (NYSE:AXP).

While these investments may not get the same media shake as the preferred deals or the up-and-coming positions from the two Buffett proteges, it’s these holdings that best highlight how retail investors can, in fact, still invest like Buffett.

Be warned, though: This works, but it isn’t particularly exciting.

Invest long term
The Coca-Cola Company (NYSE:KO) first showed up in Buffett’s annual shareholder letter in 1988. At the time, he wrote:

We expect to hold these securities for a long time. In fact, when we own portions of outstanding businesses with outstanding managements, our favorite holding period is forever.

And hold he has. The holding period for The Coca-Cola Company (NYSE:KO) is now closing in on three decades. And those three decades have treated Berkshire well.

KO Total Return Price Chart

KO Total Return Price data by YCharts.

Can you still invest like Buffett? Sure, find great companies, buy them, and hold on for a long, long time.

Quality and well-managed trumps cheap
Buffett is widely known as a “value” investor. To many, this is interpreted as buying the cheapest stocks possible. Buffett is explicitly against that notion.

When Wells Fargo popped up in Berkshire’s 1990 shareholder letter, Buffett had this to say:

…we have no interest in purchasing shares of a poorly managed bank at a “cheap” price. Instead, our only interest is in buying into well-managed banks at fair prices.

With the banking sector melting down in 1990, there were plenty of cheap banks. But Wells Fargo was well run and had a conservative culture. Both endured and led to the giant bank skating through the more recent financial crisis while others… well, didn’t.

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

The 10 Countries with the Highest Suicide Rates

The 10 Most Technologically Advanced Countries in the World

The 10 Safest Countries in the World to Live in Peace

The 10 Top Selling Smartphones in the World 2014

The 12 Biggest Shopping Centers in the World

The 10 Friendliest Countries in the World

Qihoo 360 Technology Co Ltd (QIHU), Actavis plc (ACT), Yahoo! Inc. (YHOO) Among 20 Long Ideas from Sohn Canada

The 10 Laziest Countries in the World

The 10 Most Polluted Countries in the World

The 10 Most Dangerous Cities in America 2014

The Top 10 Gold Producing Countries in the World

The 10 Tallest Buildings in the World

The 10 Richest Stand Up Comedians in the World

The 10 Fattest Countries in the World

The 5 Best Summer Jobs for Teens

The 10 Most Religious Countries in the World Keeping the Faith

The 10 Most Educated Countries in the World

The 10 Most Popular Cell Phones in the World

The 10 Drunkest Countries in the World

The 10 Most Expensive Private Schools in the World

The 10 Smallest Countries in the World

Walking Dead Season 5 Spoilers You’ll Wish You Didn’t Know

The 10 Poorest Countries in the World

The 10 Greenest Countries in the World

The Top 10 Countries with the Highest Population in the World

The 10 Most Visited Countries in the World

The Top 10 Star Wars Characters in the Iconic Series

The 10 Most Expensive Android Phones in the World

5 Reasons Why The Illuminati Is Real and a Threat to Society

The 6 Scariest Halloween Costumes Ever Screamed At

The 4 Biggest Hedge Fund Managers in the World Today

The 15 Most Densely Populated Countries in the World

The 10 Biggest Tea Drinking Countries in the World

Top 6 Ways to Improve Your Checkout Process and Close Sales

The 5 Most Profitable Online Businesses You Can Start Today

The 20 Most Profitable Hospitals in the US

The 5 Most Profitable Home Businesses to Start

The 7 Teams that Will Win the Stanley Cup in 2015

The Top 10 Most Expensive Digital Cameras to Snap Stunning Shots With

The 10 Highest Quality Fast Food Restaurants In America Today

The 8 Best Halloween Decorating Ideas to Spook Up Your House

10 Marvel Women that Should Get a Movie Right Now

The 20 Best Remixes of Popular Songs that Will Make You Forget the Originals

7 Most Expensive Cities in the World

5 Least Expensive Cities in the World

10 Celebrities Who Believe In Scientology

10 High Margin Food Products to Build a Business Around

The 10 Most Expensive Clothing Stores in the United States to Get Decked Out At

The 5 Biggest Kickstarter Scams That Swindled Backers’ Donations

The 10 Most Expensive Boarding Schools 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!