Why it’s a good buy now
Housing has been on and absolute tear and Toll Brothers Inc (NYSE:TOL) is trading near a 52 week high. But with a P/E around 11, it’s still a fantastic value here. One thing we can all learn from Buffett is to mimic his preference for companies that can charge more for their products, without losing customers. That’s luxury homes in a nutshell, and Toll Brothers Inc (NYSE:TOL) is the biggest fish in that pond. Considering its phenomenal performance in 2012 and the fact that its growth story (PEG of 1.15) has plenty of legs to it–there’s still value there.
AFLAC Incorporated (NYSE:AFL)
Nothing would be more “old-school Berkshire” than buying an unloved, undervalued insurance stock. That’s exactly what Aflac is and while it serves a vastly different function than Berkshire’s Geico, it boast an even greater moat. AFLAC Incorporated (NYSE:AFL)is synonymous with supplemental health, life, and injury insurance.
Why it’s a good buy now:
I’ll never understand why the market, pundits, and analysts always have this one in there cross-hairs–but they just do. The stock is perpetually undervalued and the company would be better off bought. This way it could escape the market and just return gobs of cash to a would be acquire-rs bottom line.
With a P/E of just 8 and a return on equity around 20%, now’s as good a time as any to buy AFLAC Incorporated (NYSE:AFL). The company has shown tremendous consistency by growing earnings, revenue, and its dividend yield over 10% each of the past five years. It’s worth noting, that the company did this and stayed completely profitable all the way through the financial “meltdown” of 2008 and the great recession.
With a solid track record and a price-to-earnings growth ratio of just 1.21%, the stock deserves to be bought–by Buffett and by you.
Number four, number five, and the “ah-ha” moment
All of these stocks operate in industries (energy, housing, insurance) that are “needs” not “preferences. And all of our firms have long-tenured management teams, with AFLAC Incorporated (NYSE:AFL) and Toll’s management team dating back a half century a piece. In short, they fit No. 4 and 5 of Berkshire’s acquisition criteria; they have simple business models and long-tenured management teams.
When Warren Buffett speaks, the world listens. There’s a reason for that.
The “ah-ha” moment for us is that if these businesses meet Buffet’s criteria, perhaps they should meet ours. We can’t know which “Elephant” Buffett will bag, but these stocks have proven track records and are worth buying on their own merits.
And if Warren wants to join us, well, I certainly won’t stand in his way!
The article Buy These 3 Undervalued “Elephant” Stocks…Before Buffett Does originally appeared on Fool.com and is written by Adem Tahiri.
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