Warren Buffett of Berkshire Hathaway is a legendary value investor who has made fortunes in the stock market for himself and his Berkshire Hathaway (BRK.B) shareholders. A recent Bloomberg article sums up the fact that Berkshire has billions in cash and Warren Buffett is now seeking new companies to either invest in or buyout. The article states:
Berkshire is seeking "to purchase some large operations that will give us a further boost," the billionaire said in his annual letter to shareholders included in the report. "We now have eight subsidiaries that would each be included in the Fortune 500 were they stand alone companies. That leaves only 492 to go. My task is clear, and I'm on the prowl."
Buffett has assembled a team of investment specialists who are helping him seek out new potential additions to the Berkshire portfolio. In recent months, Berkshire has made investments in Intel (INTC), Bank of America (BAC) and IBM (IBM). With the recent investment emphasis being on financials and tech, there is a possibility that this investment theme will carry on into 2012. Here is a look at some financial and tech stocks, plus two others that fit the classic value approach that Mr. Buffett has built a fortune on:
Hewlett Packard (HPQ) provides a wide variety of technology products and services which include printers, computers, tablets, software, consulting and other business solutions. This company has remained solidly profitable, but the stock has been weakened by heavy turnover in the CEO position. The latest CEO, Meg Whitman is facing challenges, not the least of which is regaining investor confidence. It's important to note that consumer confidence in the quality of HP products seems to remain solid, even if the company is not thought of by some as being leading in the "cool" factor. Hewlett Packard appears undervalued with a price to earnings ratio of just about 6 and a book value of $19.77. I think it makes sense to average into the stock over time.
Why Warren Buffett could find this stock to be an attractive investment: Hewlett Packard has a storied brand and it's the kind of company that could use a confidence booster, much like the one Bank of America received when Mr. Buffett announced an investment in one of America's largest banks. Hewlett Packard's situation also reminds me of when International Business Machines (IBM) fell to about $40 many years ago, as some investors believed the company was too stodgy to compete or ever grow again. IBM ended up with a new CEO who turned the company around, and investors who bought IBM stock when investors had soured on it made huge gains.
Here are some key points for HPQ:
Current share price: $24.04
The 52 week range is $21.50 to $43.28
Earnings estimates for 2011: $4.04 per share
Earnings estimates for 2012: $4.42 per share
Annual dividend: 48 cents per share which yields 2%
Hartford Financial Services (HIG) offers a variety of financial services which include annuities as well as various insurance products. This stock has been in an uptrend since bottoming out around $15.50 per share in December. Even with the recent rally, the stock still offers plenty of value. Hartford shares are trading way below book value, which is $50.51. It also trades at a reasonable price to earnings ratio of just around 6.5 times earnings. Since Hartford has a major investment portfolio, these shares tend to rise and drop with the stock market. Waiting for a major market pullback could provide a great buying opportunity, especially if the stock drops to about $18 per share or less.
Why Warren Buffett could find this stock to be an attractive investment: Since Mr. Buffett has invested billions in financial and insurance stocks, there is a strong chance additional investments will be made in these sectors in the future. Hartford could be a buyout target, or it sell certain parts of the company. Even if it remains independent, the stock has plenty of upside potential.
Here are some key points for HIG:
Current share price: $20.05
The 52 week range is $14.56 to $29.59
Earnings estimates for 2012: $3.35 per share
Earnings estimates for 2013: $3.69 per share
Annual dividend: 40 cents per share which yields 2%
Johnson Controls, Inc. (JCI) manufactures and markets equipment and controls for heating, ventilating, air-conditioning, refrigeration, etc. It also manufactures automotive products, including electronic components, seating, and many other interior parts. The stock has been weak due to concerns over a slowing European economy. The company is also facing challenges over allegations that it has created pollution in China at a battery factory it operates. The company has disputed the allegations, but this could keep the stock under pressure until some resolution is reached. Because of this issue, it makes sense to average into the stock over time. Still, the stock looks undervalued for long-term investors as it trades for just about 10 times earnings. The 2.2% dividend yield will pay investors to wait for a higher stock price.
Why Warren Buffett could find this stock to be an attractive investment: Mr. Buffett has been known to invest in industrial and housing stocks, so an investment in Johnson Controls might look attractive now.
Here are some key points for JCI:
Current share price: $31.70
The 52 week range is $24.29 to $42.92
Earnings estimates for 2011: $2.76 per share
Earnings estimates for 2012: $3.37 per share
Annual dividend: 72 cents which yields 2.2%
Hasbro, Inc. (HAS) is a leading maker of toys and games which include brands like Tonka, Nerf, Parker Bros., Milton Bradley and many more well-known favorites. Hasbro shares have been weak for the past few weeks, due to concerns over lower than expected toy sales and rising manufacturing costs. However, the company is still solidly profitable and the lower price is giving investors a rare opportunity to buy a great brand-name stock. Hasbro recently announced that it repurchased about 10.5 million shares in 2011, and it raised the quarterly dividend by 20%, to 36 cents per share.
Why Warren Buffett could find this stock to be an attractive investment: Hasbro looks like the perfect stock for a value investor like Warren Buffett. The stock is trading for about 11 times earnings and it offers an oversized dividend which is currently about 4%. Hasbro owns many highly recognizable brands and after a recent drop the stock looks undervalued.
Here are some key points for HAS:
Current share price: $35.41
The 52 week range is $31.36 to $48.43
Earnings estimates for 2012: $2.99 per share
Earnings estimates for 2013: $3.23 per share
Annual dividend: $1.44 per share which yields 4.1%
Disclaimer: Data is sourced from Yahoo Finance. No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.