5 Buffett Companies With Incredible Profit Margins
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When thinking of value investments many think about old boring businesses with margins that have been knocked down over the years. Buffett has made his billions by finding value stocks with a moat full of sharks, crocs, and piranhas. These protected franchises are able to keep high margins for years.
One of Buffett's investments is M&T Bank Corporation (NYSE: MTB) with a current profit margin of 21.42%. The American bank is reported to have assets of $81 billion and is one of the top 20 largest banking corporations in the United States. Based out of New York, M&T Bank Corporation provides a large number of financial services, including consumer and corporate banking, insurance, mortgages and credit cards and was one of the few banks who chose not to lower its dividend during the 2009 global financial crisis. In the market, M&T Bank Corporation has seen a year of ups and downs, but mostly ups since December of 2011. Currently enjoying an overall return of +18% for the past 52 weeks, it seems Buffett is happy with this investment.
Another massive financial company with a huge Buffett backing is Wells Fargo & Company (NYSE: WFC) and it has a current profit margin of 22.56%. Considered the fourth largest bank in the United States in terms of assets, and regarded highly for their customer service and overall brand, it doesn’t come as a surprise Wells Fargo made this list. Offering banking services including retail banking, wealth creation and retirement planning, Wells Fargo can help clients secure credit cards, loans and give clients financial analysis. The company has also enjoyed a good year on the stock market, seeing a decent amount of growth in their market value since December 2011 and their overall return for the past 52 weeks is 40%. Not bad Mr. Buffett.
Only slightly ahead of Wells Fargo with a profit margin of 22.73%, Intel Corporation (NASDAQ: INTC) is one of the few companies to make this list not within the financial services industry. Intel is an American company, and manufacturers semiconductor chips, including Bluetooth chips, motherboard chips and microprocessors. Intel still isn’t a company to be sniffed at though; while they aren’t in finance, they are the world’s leading semiconductor chip manufacturer and turn revenue in the billions. The company has also seen a great year on the stock market, with their market value increasing fairly steadily from August 2011 till May 2012. Currently their overall return for the past 52 weeks is sitting pretty at 29%.
With the fourth highest profit margin is the only other company of these five that does not deal in financial services: Liberty Media Corporation (NASDAQ: STRZA). Liberty Media Corporation is a media holding company, based out of Colorado in the United States. Liberty Media Corporation airs a selection of popular channels, like the Discovery Channel, plus it has interests in a series of other companies including Barnes and Noble and Time Warner. Liberty Media Corporation was awarded 224th place on the Fortune 500 2011 list. With steady growth since October 2011, Liberty Media Corporation is currently seeing an overall return of +42% for the past 52 weeks.
Yet with the highest profit margin of these five companies that Buffett has chosen to invest in is MasterCard (NYSE: MA), with a profit margin of 29.73%. Another multinational financial services company, MasterCard specializes in credit cards and payment systems and was created as a competitor for Visa Inc. MasterCard became a publicly traded company in 2006 and its primary purpose was to brand credit and debit cards across the world. It is best known for its “priceless” ad campaigns, aired worldwide. MasterCard was off to a slow start in August 2011, but slowly gained market value throughout the rest of the year until hitting a high in February of 2012. The stock is currently seeing an overall return of 30% since August 2011.
Buffett certainly seems to favor financial institutions when he considers investing, perhaps it's their generous profit margins. All five of these companies have incredible brands which allow them to charge higher prices than competitors. Just look at Intel vs AMD. Buffett loves when companies have a moat since this allows the company to enjoy higher profit margins.
mthiessen has no positions in the stocks mentioned above. The Motley Fool owns shares of Intel, MasterCard, and Wells Fargo & Company and has the following options: short OCT 2012 $33.00 puts on Wells Fargo & Company and short OCT 2012 $36.00 calls on Wells Fargo & Company. Motley Fool newsletter services recommend Intel and Wells Fargo & Company. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.
