Scores of investors scour Berkshire Hathaway Inc. (NYSE:BRK.A)’s holdings in attempts to mimic legendary CEO Warren Buffett’s picks. After all, Buffett is deemed the greatest investor of all time, and rightly so.
Berkshire Hathaway Inc. (NYSE:BRK.A) has averaged an annual growth in book value of 19.7% over the last 48 years. That compares to 9.4% for the S& P 500 Index, including dividends, over the same period.
Consider that a $10,000 investment in Berkshire Hathaway in 1965, the year Buffett took the helm, swelled to nearly $30 million by 2005. In comparison, $10,000 plowed into the broad-based S&P 500 would have grown to only about $500,000.
Moreover, the conglomerate produced a total return of 76% over the decade from 2000-2012, versus a negative 11.3% return for the broad based S&P. Even more impressive, Berkshire Hathaway Inc. (NYSE:BRK.A) has done it with minimal debt.
When Berkshire recently reported its Q1 portfolio holdings, it was revealed the Omaha based company holds 41 stocks with a total value of $85 billion. It upped its stake in Wells Fargo, Verisign , DaVita Health Care, Direct TV, Wal-Mart Stores and National Oilwell Vacaro. It reduced its position in snack food company Mondelez, and sold its position in General Dynamics and Archer Daniels Midland.
Buffett’s only buy in Q1 was Chicago Bridge & Iron Company N.V. (NYSE:CBI)
In Q1, Buffett’s sole addition to his portfolio was Chicago Bridge & Iron Company N.V. (NYSE:CBI). Buffett bought 6,508,600 shares at an average price of $52.76.
The company, founded in 1889, provides conceptual design, technology, engineering, procurement, fabrication and construction, commissioning and associated maintenance services to customers in energy and natural resources industries.
Chicago Bridge & Iron Company N.V. (NYSE:CBI)’s first quarter 2013 results were impressive. Net income came in at $33.6 million or $0.32 a share. Revenue was $2.3 billion, with new contract awards of $1.9 billion, resulting in a backlog of $25.5 billion. Year-over-year, revenue soared 87%. Forward guidance was optimistic.
Present projects run the gamut of technologies for upstream and downstream oil and gas, nuclear, clean coal and gas, hydroelectric power, water and wastewater, metals and mining and federal projects.
Last year, Chicago Bridge & Iron Company N.V. (NYSE:CBI) bought rival Shaw Group in a $3 billion deal that created one of the world’s largest infrastructure companies. The merged company, called Chicago Bridge & Iron Company N.V. (NYSE:CBI) & Shaw, is involved in everything from building nuclear power plants in the U.S. and China to constructing gas-processing plants and oil storage tanks globally.
At the time of the deal, the combined company had a $28 billion order backlog of projects in the oil, gas and electrical industries.
The pick falls in line with Buffett’s aim of finding companies that are at the center of the recovering U.S. economy and stand to perform well over the long run. In coming years, utilities are expected to spend billions of dollars building new power plants and retrofitting coal burning plants to meet stricter anti-pollution regulations. That bodes well for Chicago Bridge & Iron Company N.V. (NYSE:CBI) indeed.
Competitor Caterpillar Inc. (NYSE:CAT) creeping along
Chicago Bridge & Iron’s rosy outlook is in contrast to that of colleague Caterpillar Inc. (NYSE:CAT). In fact, Caterpillar currently looks like a sleepy dog.
The company missed on Q1 earnings and revenue, and cut its full year outlook to reflect a drop in demand for heavy equipment from its mining customers. Earnings came in at $1.31 per share, down from $2.37 per share in the same quarter a year ago. Revenue tumbled to $13.21 billion from $15.98 billion.
This year’s full sales outlook was revised downward to a range of $57 billion to $61 billion. The disappointing quarter and guidance came on the heels of an 11% layoff of its workforce at an Illinois plant that makes mining equipment.
Caterpillar Inc. (NYSE:CAT) said it had 11,000 fewer people working for it at the end of Q1 2103 than a year ago.
Shares swooned after the company reported a sharp drop in sales to its worldwide network of dealers. Certainly not a good sign for the bellwether. Shares look cheap at a P/E of 11.80, and long-term sentiment remains optimistic. But for the near term, shares look rocky.
Caterpillar Inc. (NYSE:CAT) remains 6.3% lower so far in 2013, compared to the Dow’s gain of more than 15%. Plus, the shares trade well below its 10-month and 20-month moving averages.
Meanwhile, there is nothing average looking about Chicago Bridge & Iron.
CBI President and CEO Phillip K. Asherman applauded the “robust accretion of the Shaw acquisition” and anticipates continuing demand around the world for energy infrastructure will drive full year and future profits.
The company fits value investor Buffett’s criteria for an investment: strong fundamentals, solid business and plenty of potential.
One of the most difficult things for an investor is deciding which bridges to cross and which to burn. A position in Chicago Bridge & Iron can bridge a gap in most any portfolio.
The article What Warren Buffett Likes About Chicago Bridge & Iron originally appeared on Fool.com is written by Diane Alter.
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