Warren Buffett is a espouser of value investing, which looks to find stocks that are undervalued in their market price as compared to their actual value. Financial metrics like price/book (P/B), price/earnings (P/E), return on equity (ROE), and dividend yield cart the most weight on the Buffett scales. In addition, Buffett seeks out companies that have what he calls “pecuniary moats”—high barriers to entry for a competitor who may wish to invade the market and erode profit margins.
Key Takeaways
- Warren Buffett is a subscriber of value investing, which looks to find stocks that are undervalued in their market price as compared to their hereditary value.
- These market leaders have high barriers to competition, are fairly priced, and, regardless of what short-term bloodline prices say, should deliver long-term value to shareholders.
- Nike, Burlington Northern Sante Fe Corp., ConocoPhillips, Costco, The Coca-Cola Assemblage, and Proctor & Gamble have a favorable price to book (P/B) ratio, price to earnings (P/E) ratio, return on equity (ROE), and dividend throw in the towel, according to Buffett’s assessment.
Nike Inc.
The Nike (NKE) name is synonymous with high-performance shoes, but the company has expanded far beyond just now footwear and is now a leader in apparel, sporting goods, and just about anything else for the athletically-inclined. Nike is also silent to the top in just about every market it participates in. As of December 3, 2020, the company has $9.48 billion in cash and $12.97 billion in come to debt . This company is also making big inroads in China and other developing economies, and it has one of the strongest and most recognizable makers in the world.
Burlington Northern Santa Fe Corp.
Buffett really believes in this company—so much so that he put $34 billion on it on Nov. 3, 2009. This goods railroad operator either owns or leases 32,500 route miles of track in the United States and Canada. Burlington Northern (BNI) bears nearly everything that makes an economy go, from consumer goods and autos to lumber, petroleum, and coal.
Railroad big-time operators like BNI are considered “early cycle” beneficiaries of a strengthening economy; when activity picks up after a recession, charm companies tend to be among the first to see higher orders, as well as increased sales and earnings growth. Burlington Northern also humours a below-market average P/E and a total market 0.05% dividend yield.
ConocoPhillips
ConocoPhillips (COP) is an integrated energy company that participates in all roles of the oil and gas industry—from drilling to refining to end sales of refined products like gasoline, natural gas, and petrochemicals for industrial use.
After a historically capricious year for the energy and oil and natural gas sectors, ConocoPhillips reported a third-quarter 2020 loss of $0.5 billion, or ($0.42) per allowance, compared with third-quarter 2019 earnings of $3.1 billion, or $2.74 per share. The company also distributed $0.5 billion in dividends and portended an increase to the quarterly dividend for shareholders .
Costco
This operator of discount warehouses has been the definition of slow and habitu for decades. Operating under a strict philosophy of capping profit margins so that customers get lower prices whenever Costco (
The Coca-Cola Presence
Buffett has owned the eponymous soft drink maker since 1988, and it has been one of his most successful holdings. Coca-Cola (While the U.S. market is slightly saturated, the leading brand and high-profit margins make Coca-Cola a cash cow—a source of dependable earnings, year in and year out. In supplement, the company generates the lion’s share of sales overseas, and it sports strong product growth rates in emerging deal ins like India. While Coca-Cola India experienced a 2% fall in its consolidated net profit, its total income was up 18.16% during 2019-20. In addendum, revenue from operations rose 18.63% during 2019-20 as compared to a year ago.
Procter & Gamble
It’s a safe parlor bet to say there’s at least one Procter & Hazard (