Warren Buffett’s success as an investor means he has a stock portfolio in him Berkshire Hathaway Get a lot of attention. Although you should always make your own buy and sell calls, there are some interesting stocks within Buffett’s investment vehicle that are worth considering today. The list includes Chevron(NYSE: CFX), coca cola(NYSE: KO)and American Express(NYSE: AXP). Here are which ones might be worth buying, and which ones you might want to avoid.
Chevron is one of the largest integrated companies in the world Energy companies. This means that its business covers the entire spectrum of the sector, from upstream (oil and natural gas production) through midstream (pipelines) to downstream (chemicals and refining). This provides some balance to the company’s financial results, as each industry sector performs slightly differently.
The end result is that for the energy company, Chevron’s peaks and valleys are not quite as extreme as they would be if it operated only upstream. This makes it a strong choice for long-term investors looking to invest in the energy sector.
Helping things along the way is one of the most powerful things Balance sheets In this sector, with a very low debt-to-equity ratio of 0.17 times.
The real attraction now is the profits. For starters, the yield is 4.3%. This return is supported by dividends that have been increased annually for more than three decades. However, the average return in the energy sector is around 3.3%, which indicates the lagging stock performance that Chevron is currently experiencing.
Some of this has to do with an acquisition that doesn’t go as well as hoped. Some of it is related to Chevron’s lackluster results in the face of weak energy prices. However, if you have a long-term investment horizon, this strong industry is probably worth buying today. Collecting an above-average industry return while waiting for better days isn’t exactly a terrible thing.
Coca-Cola is one of the most popular companies in the world and is usually expensive to buy. But the recent pullback in prices has brought shares into an attractive range, assuming you don’t mind paying a fair price for a great company.
To provide some numbers, Dividend King’s dividend yield is around 3.2%. This is roughly halfway through the last decade, suggesting a reasonable price. This view is supported by more traditional valuation metrics such as price-to-sales and price-to-earnings, both of which are slightly below the five-year averages. While it wouldn’t be fair to suggest that Coca-Cola is a buzzy buy, it does appear to be reasonably priced.
But the real story is what you get for that price. Coca-Cola’s business has strong margins, a healthy balance sheet, and an unparalleled portfolio of beverage brands (thanks in large part to its namesake soda). While investors may have some concerns about inflationary pressures, new weight-loss drugs, and even increased scrutiny of snack foods, given the long and successful history here, it seems very likely that Coca-Cola will remain an industry leader. This suggests that the dividend will continue to be profitable and continue to rise over time – which is exactly what a conservative income investor wants to see.
American Express is a payment processor focused on high-end consumers. This is a strong area, given that wealthy clients tend to weather economic downturns relatively quickly. In fact, the fees a company collects for processing transactions tend to be fairly reliable over time.
Overall, American Express is an attractive company. But as Benjamin Graham, the man who helped coach Warren Buffett, said, a great company can be a bad investment if you pay too much for it.
After nearly doubling in price in about a year, American Express is starting to look expensive. The company’s price-to-sales, price-to-earnings, price-to-cash flow, and price-to-book ratios are all well above their five-year averages.
If you are a more active investor who cares about valuation, you may want to take some profits here. It would be understandable if long-term investors would want to stay in, given the underlying business, but new investors should probably stay on the sidelines until there is a better entry point.
Even Warren Buffett, the Oracle of Omaha, makes mistakes. So you need to take Berkshire Hathaway portfolio with caution. You also have to remember that Buffett tends to buy and hold, so the things in his portfolio today may not be things he would buy today.
But if you’re looking for some investment ideas, a look at Buffett’s stock list today raises interesting questions about Chevron, Coca-Cola, and American Express. The first two look like buyers, but the latter looks very expensive at the moment.
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American Express is an advertising partner of Motley Fool Money. Robin Gregg Brewer He has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and Chevron. The Motley Fool has Disclosure policy.
