3 of Buffett's Most Attractive Purchases in Today's Market
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I would love to spend 10 minutes in the head of Warren Buffett. The amount of wisdom that I'd glean would be a revelation comparable to the discovery of electricity. But taken in its basic form, his strategy is very simple: he pays fair prices for great businesses. Let's take a look at three of what I believe to be the best Buffett companies for the years ahead.
Bank of America is back
Buffett's Berkshire Hathaway (NYSE: BRK-A) purchased 50,000 Series T Preferred Stock of Bank of America (NYSE: BAC) in 2009. Since that time, Berkshire's market value has nearly doubled, thanks in small part to Bank of America's success. This is an example of a too-big-to fail company that Buffett couldn't resist getting his hands on. In March, Buffett told CNBC that he will run the warrants on B of A until their expiration in nearly 9 years. While mortgage problems have haunted B of A since the recession, Buffett said they are being addressed. In the last year alone, the banks's shares have roughly doubled. The increase looks set to continue, as the bank is attempting to shed its poor public image with its "Express Your Thanks" campaign that could generate up to $1 million towards wounded returning military service members. A sour public image has held shares well below pre-recession levels, and campaigns such as this could put the bank back in people's good graces, and in their portfolios.
Going against the grain
The master also purchased shares of Coca-Cola (NYSE: KO) when others had their doubts about the possibility of an extended run at the company. At the time when others said the company was fully valued, Buffett purchased $1 billion worth. In the next 10 years, the company's value would increase by about 2,000%. His largest investment at that time is still priced around the 1998 level, after its massive increase, but as the company continues to profit from overseas ventures, the future is looking bright for this company. Buffett has stayed confident in his 25-year investment, and he appears to be waiting for Coca-Cola's next surge. While Coca-Cola is less likely than Bank of America to experience massive share price growth in the years ahead, it is a wise long-term play as the company moves for more global expansion.
Auto sector still has room to rise
In the final quarter of 2012, Berkshire increased its stake in General Motors (NYSE: GM) by 67%. However, its stake in the company is only a 25-million shares, worth over $800 million, which is relatively small for Berkshire. Many investors are still hostile towards the company because of the bailout it received in 2009. Many of those holding stocks and bonds with GM were left empty handed after the bailout and bankruptcy proceedings, and that`s likely kept a lot of the company's previous investors far away from the auto maker.
However, that animosity represents a buying opportunity for those who see profits rising. And they do looked poised to rise. The car company is at the front-end of electric vehicles, and appears ready to take a serious chunk of this market. Furthermore, the global auto market plays a major stake in whether manufacturers in the sector will thrive. Even though GM suffered immensely during the recession, it is still one of the top three auto giants in the world. In fact, its sales are comparable to Toyota and Volkswagen.
Making careful selections
Even though Buffett usually makes the right calls on his investments, it's wise to use your discretion when following his lead in purchasing stocks. I believe the three aforementioned stocks that Berkshire holds are poised for the most growth in the years ahead, out of all of Buffett's stock investments.
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Phillip Woolgar owns shares of Bank of America. The Motley Fool recommends Coca-Cola and General Motors. The Motley Fool owns shares of Bank of America. 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!