Warren Buffett's 7 Favorite Stocks With Strong Fundamentals

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 |  Includes: COP, CVS, GD, IBM, INTC, MCO, T, TMK, V, XOM
by: Dividendinvestr

Warren Buffett is one of the greatest investors of all time. His track record is mind-numbing but during the past decade he shifted his focus from "becoming wealthy" to "staying wealthy." He explained in 2006 that one of the best ways of staying wealthy is investing in high-dividend stocks with stable businesses, like utilities. He has been holding on to his positions for years if not decades to minimize taxes. We recommend investors follow a similar strategy in order to protect their investments and grow their portfolio at modest rates. This is a better alternative to investing in long-term government bonds, which yield around 2%.

Warren Buffett initiated new positions in International Business Machines (NYSE:IBM), Intel Corp (NASDAQ:INTC), Visa Inc (NYSE:V), CVS Caremark Corp (NYSE:CVS), Directv (DTV) and General Dynamics Corp (NYSE:GD) during the third quarter of 2011. Below we compiled a list of Warren Buffett's picks with strong fundamentals at Berkshire Hathaway's most recent 13F filing. All stocks in this list have P/E ratio of below 15 and Total Debt/Equity ratio of lower than 0.4. We obtained market data from Finviz and hedge fund holdings from Insider Monkey.

ConocoPhillips (NYSE:COP): ConocoPhillips is an integrated energy company operating worldwide. Shares of COP recently traded at $72.66 with a trailing price to earnings of 9.3 and a forward price to earnings of 8.62. COP has a 3.63% dividend yield and gained 12.53% during the past 12 months. The stock has a market cap of $96.5 billion and total debt/equity ratio of 0.35. Buffett held the largest position in COP with his $1.8 billion investment at the end of September. Donald Chiboucis' Columbus Circle Investors sold out its 1.8 million shares of COP during the third quarter 2011.

Moody's Corp (NYSE:MCO): Moody's provides credit ratings, research, tools and analysis for financial markets. Shares of MCO recently traded at $35.83 with a trailing price to earnings of 13.57 and a forward price to earnings of 13.68. MCO has a 1.79% dividend yield and gained 22.71% during the past 12 months. The stock has a market cap of $8 billion and total debt/equity ratio of 0. Buffett had $865 million invested in MCO shares. Jeffrey Ubben's Valueact Capital increased its holdings of MCO by 50% during the second quarter and currently Valueact Capital holds a $505 million position in this company. Robert Joseph Caruso's Select Equity Group initiated a $17 million brand new position in MCO during the third-quarter of 2011.

Intel Corp : Intel Corporation is a major diversified electronics company. Shares of INTC recently traded at $25.25 with a trailing price to earnings of 10.93 and a forward price to earnings of 10.65. INTC has a 3.33% dividend yield and gained 25.87% during the past 12 months. The stock has a market cap of $128.6 billion and total debt/equity ratio of 0.15. Buffett initiated a $199 million position in INTC during the third quarter of 2011. Paul Ruddock and Steve Heinz's Lansdowne Partners had $491.52 million at the end of the third quarter, while Ken Fisher's Fisher Asset Management had roughly $414.02 million in the company at the end of September.

Directv : Directv provides digital television entertainment in the United States and Latin America. Shares of DTV recently traded at $43.85 with a trailing price to earnings of 13.7 and a forward price to earnings of 10.01. DTV has gained 6.51% during the past 12 months. The stock has a market cap of $30.9 billion and total debt/equity ratio of 0. Buffett initiated a $180 million position in DTV during the third quarter. Mason Hawkins held the largest position in DTV with his $1.45 billion investment at the end of September. Lee Ainslie's Maverick Capital sold nearly 2.7 million shares of DTV during the third quarter. Lee Ainslie had $60 million invested in DTV at the end of September.

General Dynamics Corp : General Dynamics provides military and commercial communications and information technology products and services worldwide. Shares of GD recently traded at $67.62 with a trailing price to earnings of 9.42 and a forward price to earnings of 8.93. GD has a 2.78% dividend yield and lost 2.71% during the past 12 months. The stock has a market cap of $24.1 billion and total debt/equity ratio of 0.3. Buffett had $174 million invested in GD shares. Longview Asset Management held the largest position in GD with its $1.9 billion investment at the end of September.

Torchmark Corp (NYSE:TMK): Torchmark Corporation life and supplemental health insurance products and services. Shares of TMK recently traded at $43.46 with a trailing price to earnings of 9.19 and a forward price to earnings of 8.28. TMK has a 1.1% dividend yield and gained 7.23% during the past 12 months. The stock has a market cap of $4.4 billion and total debt/equity ratio of 0.24. Buffett had $148 million invested in TMK shares. Buffett increased his TMK shares by 50% during the third quarter.

Exxon Mobil Corp (NYSE:XOM): Exxon Mobil is one of the leading integrated energy companies operating worldwide. Shares of XOM recently traded at $85.12 with a trailing price to earnings of 10.26 and a forward price to earnings of 10.19. XOM has a 2.21% dividend yield and gained 15.9% during the past 12 months. The stock has a market cap of $408 billion and total debt/equity ratio of 0.11. Buffett had $31 million invested in XOM shares. Oil Billionaire T. Boone Pickens' also initiated a $7 million brand new position in XOM during the third quarter of 2011. Ken Fisher's Fisher Asset Management held the largest position in XOM with its $519 million investment at the end of September.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.