7 Buffet Stocks Which Have Significantly Outperformed In 2011

by: The Analyst Hub

The following is a list of seven stocks held by legendary value investor Warren Buffett which have significantly outperformed S&P500 in 2011.



Shares Held - 09/30/2011

YTD Price Change

International Business Machines




Kraft Foods Inc.




Moody's Corp.




Costco Wholesale Corporation




Intel Corporation




Visa Inc.




CVS Caremark Corporation




Source: 13F filing

Most of these stocks still provide a very good value investing opportunity. I like IBM (IBM), Intel (INTC), Kraft (KFT) and Visa (V) the most among above stocks. IBM's stock has been a consistent performer in the past few years, outperforming S&P 500 in 5 of the past 6 years. I like the defensive nature of the business, given that its high visibility annuity business accounts for more than 50% of revenue and 70% of profits, which will support the company during downturn. Trading at around 13x forward earnings, the stock does not look pricey.

Intel is a good long candidate in the Semiconductor space. It positively surprised The Street last quarter, despite macro headwinds and sluggish industry PC unit growth. According to Gartner, global PC shipments grew 3.2% in Q3. Intel's 19% revenue growth clearly represents a significant outperformance. The primary drivers were 10-12% higher chip prices from feature additions (graphics) and superior competitive position.

I believe current year and next year consensus sell side estimates for Intel are likely to prove conservative, given its strong product execution (for example: Sandy Bridge), pricing, and secular growth in servers. Trading at 10.21x forward earnings, the stock does not look expensive, and there is a good chance of multiple expansion. A 3.5% dividend yield is an added benefit for investors looking to buy the stock.

Kraft is the largest U.S. food manufacturer, and second-largest in the world, behind Nestle (OTCPK:NSRGY). I am bullish on Kraft because of its international growth potential and value creation from the planned spin-off.

Kraft is seeing significant growth in international markets, and in the third quarter, developing markets contributed around 66% of incremental year/year segment profits, and international contributed 86%. In the near future, I expect it will continue to enable Kraft to derive faster-than-average peer growth. It will also improve Kraft's debt ratio, enabling it to return more cash to its shareholders in the future.

Another major catalyst for Kraft's stock is its planned split into two companies. Kraft's business consists of its high-growth snacks business and the stable return grocery business. Kraft is planning to split up these two businesses in FY12. This will unlock significant value by highlighting an above peer growth profile of the global snacks business, driving operational improvements, and by allowing each company to pursue different capital allocation priorities.

Kraft is trading at 14x FY12 EPS, which is over 12% discount to its average 10-year historical PE multiple of 16x. I believe this is a good opportunity to initiate a long position in the company. Visa Inc. is a good example of "investing forever" kind of stock. I expect it to continue benefiting from the secular shift in spending from paper to plastic globally for the next several years.

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