Marshall Hargrave's  Instablog

Billionaire investor and Berkshire Hathaway founder Warren Buffett is a pupil of legendary investor Benjamin Graham. Berkshire is a major conglomerate investing in a number of companies across a number of industries, focused on acquiring great companies at a discount to intrinsic value. Since Buffett is one of the world's top investors, I found it useful to take a look at what Buffett and Berkshire were buying and selling during the fourth quarter.

Buffett sold off...

Berkshire dumped 34% of its stake in Johnson & Johnson (NYSE: JNJ) during the fourth quarter. Johnson & Johnson pays a decent dividend yield at 3.2%, but its 60% dividend payout ratio is not quite as appealing. I generally look for a dividend payout of less than 50% to ensure a company can remain flexible during economic downturns. Valuewise, Johnson & Johnson has a PEG of 3.0; anything above 2.0 is considered expensive.

For fiscal 2013, Johnson & Johnson forecasts earnings to come in between $5.35 and $5.45 per share, but analysts' consensus calls for $5.50. This lowered guidance includes a $0.25 hit from U.S. health-care reform. The company, which makes drugs, health-care products, and medical devices, should still see supply issues due to its product recalls and suspension of manufacturing at its Fort Washington plant. The company doesn't expect that site to be ready for the FDA certification review process until late 2013.

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