trade idea: Buffet type of investment...

M

mizhael

trade idea: Buffet type of investment...

Let's say you want to follow Buffet type of investment philosophy and buy good business,

What will be the good business that you want to buy in today's environment?

Extension: what will be the business that you want to short for mid to long term?

(holding period: mid to long term, at least hold until after the economic downturn and crisis.)

Lets make a laundry list in this thread here, and as follow-up, we will try to do some analysis... lets see...
 
HNZ- huge market share, possible takeover candidate (CPB)
DEO- unless you think people will stop drinking alcohol, cheap as its been in years
 
· Industry leader
· Business 'Moat' i.e. KO=good brand, WMT=Low cost provider etc
· Pricing power (can pass on increased costs to customers)
· Product or service with barriers to entry or low risk of obsolescence
· Good Free Cash returns on Invested capital
· Low debt requirements
· Sensible re-investment of cash flows
· Strong balance sheet is important right now
 
If you are looking for safety, Buffett himself (Brka/b) is a pretty good bet and currently undervalued. Stock is worth about $4000 (B shares)

MSFT- solid tech company selling at around 14% FCF/EV Yield
Of course, the risk with Microsoft is their technology could become obsolete in the future. An understanding of the industry would be important here.

PFE- Same as MSFT, selling cheap but technology risk

CSCO
INTL- both as MSFT
 
None of the above.

In a Big Bad Bear market (which I believe we're in and won't bottom until '14-'16), nearly EVERY company and nearly EVERY investor "gets it". Unless Buffy sells into a very high percentage cash position [or bonds, or gold, or whatever avoids the decline], BRKA is likely to trade <20,000 at THE BOTTOM... maybe even <5,000.
 
It depends what you mean-

Are you talking about the price of the stock or the value of the assets and cash flows of the business?

No one knows what the stock price will do short/ medium term as it depends on the fear and greed of the market players.

Over the long term the stock price will reflect the underlying economics of the business.
The difficulty lies in judging what the cash flows and returns on capital of the business will be in the future.

My guess is that some of the large, healthy companies with plenty of cash will pick the bones of the dead and not only survive but will be in an even stronger position 10 yrs from now.

Should you wait till this bear mkt bttms out to buy these strong companies? Of course but who knows when that is.

For the long term investor, now is a very good time to be buying quality. Will it get cheaper? probably, so scale in over time
 
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