Billionaire Warren Buffett of Berkshire Hathaway Inc. (NYSE:BRK.B), the famed value investor, uses a strategy of discipline and patience. What Buffett really looks for are great companies trading at a discount to their intrinsic value, and then he holds them them for a long time.
Saying of his strategy, Buffett notes that he wants “businesses to be one that we can understand, with favorable long-term prospects, operated by honest and competent people, and available at a very attractive price.” Outlined below are Buffett’s top five stocks going into the second quarter (check out Buffett’s cheap stocks).
Wells Fargo & Co (NYSE:WFC) kept up its solid performance, posting first quarter EPS of $0.92, compared to $0.75 for the same quarter last year and beating consensus. As of last quarter, Wells’ allowance for loan losses was down 33% from its early 2010 peak. This declining loan loss provision should help drive earnings higher. Also, going forward, the continued rise of mortgage loans should help boost the bank’s earnings, where Wells Fargo & Co (NYSE:WFC) is a national leader in mortgage banking.
Coming in second was The Coca-Cola Company (NYSE:KO), which made up 19% of Berkshire Hathaway Inc. (NYSE:BRK.B)’s portfolio. Coca-Cola is the worldwide beverage company, but it’s looking to the international markets for future growth, including Latin America, India, Russia and China. Coca-Cola has invested some $2 billion in India over the past 18 years, and the beverage company now has three of the top five sparkling brands in India.
For China, The Coca-Cola Company (NYSE:KO) is looking to invest upwards of $4 billion in the country over three years, as well as invest $3 billion in Russia between 2012 and 2016, and $8 billion in Brazil through 2016. This should help the company balance out its geographical revenue makeup, where Coca-Cola hopes that developed, developing and emerging markets will contribute 33% of revenue each by the end of 2020.
The Procter & Gamble Company (NYSE:PG) made up 4.8% of the Berkshire portfolio and was its fifth-largest holding. This is of course one of fellow billionaire Bill Ackman’s top activist campaigns. Ackman has more than 20% of his portfolio invested in P&G and he believes the upside could be upwards of 60% (check out Ackman’s other top picks).
Wells Fargo & Co (NYSE:WFC) remains one of the best-positioned banks, while I think The Coca-Cola Company (NYSE:KO) can grow nicely with its international efforts. International Business Machines Corp. (NYSE:IBM) should see robust growth on the back of increased IT spending, but I would wait to jump into the stock as it appears to be fairly valued for the time being. American Express weathered the financial crisis nicely and should perform nicely as credit-related spending increases. As for the turnaround story that’s taking place at The Procter & Gamble Company (NYSE:PG), I am encouraged by the departure of McDonald as CEO and the succession plan the company introduced last week.
Marshall Hargrave has no position in any stocks mentioned. The Motley Fool recommends American Express, Coca-Cola, and Wells Fargo. The Motley Fool owns shares of International Business Machines. and Wells Fargo. Marshall is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
The article Billionaire Warren Buffett’s Top Stocks originally appeared on Fool.com and is written by Marshall Hargrave.
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