Warren Buffett’s success as an investor is due to his stock portfolio. Berkshire Hathaway It will attract a lot of attention. You should always make your own buying and selling decisions, but there are some interesting stocks in Buffett’s investment vehicle that are worth considering today. The list includes: chevron(NYSE:CVX), coca cola(NYSE:KO)and american express(NYSE:AXP). Here’s what’s worth buying and what you should avoid.
Chevron is one of the world’s largest integrated companies energy company. This means that the company’s operations span the entire spectrum of the sector, from upstream (oil and natural gas production) to midstream (pipelines) to downstream (chemicals and refining). This provides some balance to the company’s financial results, as each segment of the industry performs slightly differently.
The end result is that for energy companies, the peaks and valleys of chevrons are not as extreme as they would be if they only worked upstream. This makes it a solid choice for long-term investors looking to invest in the energy sector.
Helping things out is one of the most powerful things balance sheet The sector has a very low debt-to-equity ratio of 0.17x.
The real attraction now is the dividend. First, the yield is 4.3%. And that yield is backed by a dividend that has increased annually for over 30 years. That said, the energy sector’s average yield is about 3.3%, hinting at the lagging share price performance that Chevron is currently experiencing.
Some of that has to do with acquisitions that don’t go as expected. Some of this has to do with Chevron’s poor performance in the face of low energy prices. However, if you have a long-term investment horizon, this industry’s leading company may be worth buying now. Collecting yields above the industry average while waiting for conditions to improve isn’t so scary.
Coca-Cola is one of the most famous companies in the world, and you can usually buy shares that are quite expensive. But assuming you don’t mind paying a fair price for a great company, the recent decline has put the stock into an attractive range.
To give you some numbers, this Dividend King has a dividend yield of approximately 3.2%. This is about midway through the past 10 years, suggesting a reasonable price. Supporting that view are more traditional valuation metrics such as price-to-sales and price-to-earnings, both of which are slightly below the five-year average. It’s not fair to say that Coca-Cola is a bargain, but the prices seem reasonable.
But the real story is what you get for that price. Coca-Cola’s business boasts solid profit margins, a healthy balance sheet, and (thanks in large part to its namesake soda) a portfolio of beverage brands that is second to none. While investors may have some concerns about inflationary pressures, new weight loss drugs, and even increased scrutiny of snack foods, Coca-Cola is an industry leader given its long and successful history here. It seems very likely that this will continue to be the case. And that suggests that the dividend will continue to be paid and increase over time. This is exactly what conservative income investors want.
American Express is a high-end consumer-focused payment processor. This is a solid sector given that wealthy customers tend to weather economic downturns relatively smoothly. In fact, the fees the company collects for transaction processing tend to be fairly reliable over time.
Overall, American Express is an attractive business. But as Benjamin Graham, who helped develop Warren Buffett, said, even a great company can be a bad investment if you pay too much for it.
American Express, whose prices have nearly doubled in about a year, 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 the averages over the past five years.
If you’re a more aggressive investor who cares about valuations, you might want to take some profits here. It’s understandable that long-term investors would want to stick around given the underlying business, but new investors should probably stay on the sidelines until a better entry point is found.
Even Warren Buffett, the oracle of Omaha, makes mistakes. Therefore, Berkshire Hathaway’s portfolio should be taken with a grain of salt. You should also remember that Buffett tends to buy and hold, so what’s in his portfolio today may not be what he would buy today.
But if you’re looking for investment ideas, Buffett’s stock list today raises some interesting questions about Chevron, Coca-Cola, and American Express. The first two look like buys, but the last one seems a little too expensive at the moment.
Have you ever felt like you missed out on buying the most successful stocks? Then you’ll want to hear this.
In rare cases, our team of expert analysts “Double Down” stock Recommendations for companies that are likely to take off. If you’re already worried that you’re missing out on an investment opportunity, now is the best time to buy before it’s too late. And the numbers speak for themselves.
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We currently have “double down” alerts on three great companies, and we may not see an opportunity like this again anytime soon.
American Express is an advertising partner of Motley Fool Money. ruben greg brewer 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.
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