Top 3 Stocks That Fit Warren Buffett's Investing Style
Warren Buffett is recognized as the greatest investor of this era. His expertise in investing and financing has made him one of the wealthiest people in the world with a fortune worth over $80 billion. Warren Buffett’s company, Berkshire Hathaway, has produced a compound annualized return of 20.8% for over 50 years. This is considered to be the bellwether standard for investors to achieve. He has done this by investing in companies that have a proven record of stability and profitability while staying away from trendy companies and speculative investment strategies. His buy-and-hold value investing strategy has proven to be very successful. A closer look at Warren Buffett’s investing strategy shows that it is not too complicated. He is an investor and not a trader in that he doesn’t care about hourly, daily, weekly, or monthly stock price swings of his investments. He is a pure fundamental investor, not a technical investor. Some of the characteristics Warren Buffett looks for companies he is considering making an investment in include: • Trustworthy management who act in the best interest of the shareholders • Low debt-to-equity ratio with increasing profit margins • Minimum return-on-equity of 15% for the past 10 years • Minimum return-on-total-capital of 12% for the past 10 years • A strong economic moat – name recognition or industry dominance • The intrinsic value of company stock must be a minimum of 25% below the market value of the stock
Warren Buffett encourages people to invest in companies as if they are buying the entire company for the long-term. They should understand who these companies are, what they produce, and feel confident about what these companies will do in the future. Here are three companies that are worthy of an investment from Warren Buffett: Apple: Warren Buffett not only owns Apple stock, the stock makes up 14.63% of the Berkshire Hathaway portfolio at 165,333,962 shares as of December 31, 2017. This is the largest holding within his portfolio. Apple is a very stable company with plenty of cash-on-hand, which enables the company to quickly pay off any debt. Its average 10-year ROE is 32.6%, it has excellent earnings, it has a strong economic moat, and it has a strong management team. Torchmark Corporation: This is another company that is in the Berkshire Hathaway portfolio. Torchmark is .30% of the portfolio at 6,353,727 shares as of December 31, 2017. Torchmark is a holding company that provides whole and term life policies, supplemental Medicare health insurance products, and annuities. This company has strong earnings, plenty of free cash flow, and effective management. J.B. Hunt Transport Services: This company isn’t in Warren Buffett’s portfolio as of December 31, 2017, but J.B. Hunt Transport Services is definitely a Berkshire Hathaway-type company. This company provides ground transportation, delivery, and logistics services and is one of the top ground shipping and logistics company’s in North America by revenue. The company has a 21.3% return on its retained earnings, which reflects a strong management team. J.B. Hunt Transportation Services has strong cash flow and has the ability to pay off its debt within two years. Mark Angelo co-founded the Investment Manager in August 2009 and two affiliated investment managers in 2000 and 2016.