Berkshire Hathaway Inc. (BRK.B) CEO Warren Buffett is, undoubtedly, the greatest role model for investors. After getting into the investment game pretty early, Buffett has quite successfully transformed his initial $10,000 of investments into almost $81 billion in just around six decades.
Buffett’s investing style is quite simple and he believes in the buy-and-hold philosophy. Buffett looks for companies with long-term competitive advantages, and which can be purchased and held for extended periods of time.
These companies have solid business models and the ability to record significant growth. In other words, these companies have good earnings potential and are not concerned about whether the market will recognize its worth. They also generate plenty of cash and provide dividends, which are indicators of strong and sustainable business.
Let us then focus on the Oracle of Omaha’s favored companies that are likely to make the most of this year. Most of these companies belong to sectors such as health care, financials and communication services.
An Intriguing Value Proposition
Teva Pharmaceutical Industries Limited (TEVA) is currently one of the best value stocks in Buffett’s portfolio. Teva did face a generic-drug price weakness in recent times, leading to a slash in profit and sales guidance. After all, its top-selling brand-name therapy (Copaxone) grappled with intense competition for the very first time. But, then again, we all know that this company has an extremely efficient management team. Management retrenched nearly 25% of the company’s workforce, which will help Teva save nearly $3 billion annually in 2019.
An aging global population should also benefit Teva. Moreover, brand-name medicines nowadays are becoming pricey, and emerging-market nations mostly can’t afford brand therapies. Therefore, such nations must be looking for generic medicines which is a major positive. Needless to say, Teva is currently the world’s largest producer of generic medicines.
Teva generic portfolio, thus, will lead to large cash inflows this year while the company sports a rock-bottom valuation with a price-to-earnings ratio (P/E) of 6.30, compared with 15.74 for the S&P 500. The Zacks Consensus Estimate for its current-year earnings, by the way, increased 5.4% over the past 90 days. The Zacks Rank #3 (Hold) company has a Value Score of B. The stock has rallied 14.7% so far this year compared to the Medical – Generic Drugs industry’s gain of 8.8%.
Visa for Consistent Growth
Investors looking for consistent growth should consider Buffett-owned payment facilitator Visa Inc. (V). And when it comes to payment processors, there isn’t much competition for Visa as it is recognized both within the United States and globally.
It’s also worth pointing out that Visa’s competitors like American Express Company (AXP), given the cyclical nature of the business, is exposed to lending-delinquency risks. But, Visa’s sole focus on payment processing means the company doesn’t need to worry about delinquency.
The Zacks Consensus Estimate for its current-year earnings advanced 0.2% in the past 60 days. The company’s expected earnings growth for the current quarter and year are a healthy 15.7% and 15.6%, respectively. The Zacks Rank #3 company has a Growth Score of B. It saw its shares rise 3.7% on a year-to-date basis compared to the Financial Transaction Services industry’s gain of 2%.
Why Not Berkshire Hathaway?
Way back in 1962, Warren Buffett began acquiring stakes in Berkshire Hathaway after he figured a pattern in the price direction of its stock whenever the company closed a mill. Buffett acknowledged that the textile mill was losing money, which led him to expand into the insurance industry. The insurance business definitely paid off as evident from Berkshire’s staggering return of more than 800% since inception.
Berkshire currently has a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for its current-year earnings has moved 0.6% up over the past 90 days. The company’s expected earnings growth rate for the current year is 68.1% compared with the Insurance – Property and Casualty industry’s expected rally of 19.8%. Berkshire has already outperformed the broader industry in the past six months (+3.4% vs -0.2%).
Buffett Delves Deeper Into Telecom Space
After purchasing shares of big names from the telecommunication space like Verizon Communications, DISH Network Corporation and Charter Communications, he has taken over Liberty Latin America Ltd. (LILA). He now owns more than $1 billion worth of the broadband Internet, fixed-line telephone and mobile and other communications service provider’s total equity. Liberty Latin America currently has a Zacks Rank #2, while its shares have outperformed the Wireless National industry so far this year (+14.1% vs 4.9%).
Meanwhile, don’t let Sirius XM Holdings Inc.’s (SIRI) single-digit share price baffle you. The obvious upper hand you get with investing in Sirius XM is that there is no other public company that has a satellite radio system in orbit. This gives the provider of satellite radio servicesa monopoly, while it is also making significant money from subscribers. Sirius XM listed 33.7 million subscribers in the most recent quarter who accounted for $1.16 billion of the $1.47 billion in collected revenues.
The Zacks Consensus Estimate for its current-year earnings moved 0.4% north in the past 60 days. The company’s expected earnings growth rate for the current year is 30% compared with the Broadcast Radio and Television industry’s projected rally of 8.1%. The Zacks Rank #3 stock has outperformed the broader industry in the last one-year period (+14.3% vs +12.7%).