Contrarian Value Investing » KO

Warren Buffett Stocks Trading At 52 Week Lows Part 2

alexg — Thu, 03 Jul 2008 23:15:08 +0000

This is the second part on what stocks I am looking at. Part 1 dealt with stocks in the DJIA trading at or near 52 week lows. Next, I will look at stocks Warren Buffett or Berkshire Hathaway has bought according to Gurufocus.com.

Although studies have shown that following Buffett into stocks has been a good idea, I highly do not recommend following ANY guru into a stock. For example, think about the number of people who blindly followed Mohnish Pabrai or Martin Whitman in the last year. Plus, digging into a company’s 10-K will help anyone looking into a company get a better picture about the company and where its heading. Personally, I have followed the Oracle into a couple of holdings only after checking out the companies story. Finally, when it comes to pharma’s, Warren Buffett has stated he recommends buying a basket of them.

Kraft (KFT)- This one seems to be the one he is buying the most

Wells Fargo (WFC) – High Quality Bank

US Bank (USB) – Another high quality bank with great management

WellPoint (WLP)- Along with UNH , huge cash flow producers

UnitedHealth Group (UNH) – ^

Ingersoll-Rand (IR)- Also appears on Magic Formula screen

CarMax (KMX)- Haven’t looked into story

Glaxosmithkline (GSK)- Buy as basket

WABCO Holdings (WBC)- Have no idea

Bank of America (BAC)-

Sanofi-Aventis (SNY)- basket

US Gypsum (USG)- Moat will expand as competetors struggle with downturn

Lowes (LOW)- Will recover with economy

Also, there are several companies that Gurufocus does not list. I am guessing this is due to Warren Buffett purchasing the securities before GF was established. From the top of my head….

Moody’s (MCO)

American Express (AXP)

Coca-Cola (KO)

Proctor and Gamble (PG)

Disclaimer: I own PG and USB, I sold out of my holding in UNH a week ago.

What stocks are you looking at? Part 1

alexg — Thu, 03 Jul 2008 06:39:27 +0000

Well folks, with volatility comes opportunity. The market is now 20% off its highs, which puts it in bear market territory. The 52 week low list gets longer and longer every time the markets has triple digit loses. Over at the magic formula investing website, some quality names are appearing in the screen. Now, if you consider yourself a contrarian value investor, this is a good time to create a list of names that could be potential buys. The headlines might sound as if the world is coming to an end, but we have been here before and the country has pulled together and rebounded.

Below is a list of stocks that I have a.) looked at or b.) currently looking at. As always, due your homework.

DOW Stock at or near 52 Week Lows

American International Group (AIG) – Stay away, I was wrong, management sucks. Firm has lost its culture

American Express (AXP)- Trading at historically low valuations; Buffett might be buying

Boeing (BA)- Cannot produce a plane

Bank of America (BAC)- Again, Buffett might be buying here as he originally started buying at $35?

Citigroup (C)- Who knows how much junk is left in the trunk?

DuPont (DD)- I don’t know much about….

General Electric (GE)- Old Faithful

General Motors (GM)- “I want my MPG…….oooops!”

Home Depot (HD)- Trading at historically low valuations

Intel (INTC)- Outside Circle of Competence

JP Morgan (JPM)- Has one of the best CEO’s

Coca-Cola (KO)- BRAND

3M (MMM)- Great ROE%

Merck (MRK)- Don’t know much, I believe they still have viagra lawsuits….

Microsoft (MSFT)- Don’t Know Much

Pfizer (PFE)- N/A

Proctor and Gamble (PG)- I love and own it at these levels

AT&T (T)- Surprisingly, not much buzz among the college crowd. More buzz surrounding Blackberry ( I have a blackberry myself )

United Technologies (UTX)- Im interested….

Verizon (VZ)- Love their products, hate their customer service

Im also very interested in Exxon (XOM)- The company is priced for $85 oil and estimates appear to be very low. (thanks Daveinhackensack!). Whether we like it or not, Exxon is a cash machine with a credit rating that is better than some countries.

Disclosure: I own PG,

Take Control of This Market

alexg — Mon, 09 Jun 2008 18:05:33 +0000

Without a doubt this weekend’s news was the major spike in oil and the stock markets huge loss on Friday. Of course, when these types of days happen, CNBC has to do some sort of special to show us how the world is going to end, in this case they did a special on America’s oil crisis. I wonder if one day they will do a special on the many bargains the market is starting to offer.

Who would have thought we would see Wells Fargo @ $25. GE at $30 anyone? Fortunately for us “small” investors, volatility is our friend. Wall Street is wired a bit different than value investors. They have a buy high and sell higher mentality or my favorite, buy high and sell lower. Nevertheless, this is exactly the wrong thing to do in markets like these. In total, I read about 10 articles that dealt with “how the market is risky due to Friday’s loss”. I read another 5 on “how bonds are safer than stocks and where to put your money.” I immediately took out my highlighter and headed for the stock tables.
There are several interesting names approaching interesting levels. Companies like Coca-Cola (KO), Proctor and Gamble (PG), Pepsi (PEP) , United Technologies (UTX) usually trade at higher multiples than they are trading at today. But those companies are too big for my liking. A Company like Johnson Controls (JCI) has more room to grow and is attractively priced at these levels.

Johnson Controls is currently trading at multiples it has not seen since the turn of the millennium. Although, it will not provide catastrophic returns, JCI should do fine as the economy and the market recovers.

This company supplies building controls and energy management systems, automotive seating, and batteries. -S&P Report

Below are some of the numbers
P/E: 14
Forward P/E: 11
ROE: 15%
ROA: 5%
EV/EBITDA: 8

Disclaimer: I own shares of JCI through an investment club