In the world of free investing articles, rarely do you come across an article pitching stocks that the author has personally backed by cold, hard cash. That's exactly what I offer today: three stocks you will find in my personal brokerage accounts.
Even better, all three of these are stocks I would buy today if I didn't already own them. (They represent between 3% and 8% of my portfolio each, so I hold a healthy allocation of all of them already.)
Also, interestingly, all three stocks are owned and recommended by Motley Fool Million Dollar Portfolio, our real-money investing service.
1. Bridgepoint Education
Bridgepoint Education (NYSE: BPI ) is an online, for-profit educator (cue the boos and hisses). Actually, those boos and hisses are just fine with me -- they are the reason Bridgepoint offers such an opportunity today. This entire industry has taken blows from all sides over the past couple of years, with the punches coming from a round-robin of government regulators, short-sellers, and even Congress.
The reasons for the aggression are largely warranted. Across the industry, so-called "guidance counselors" were really salespeople in disguise working commission to sign up new students. Evidence that for-profit education degrees can land graduates higher-paying jobs has been scant. And for-profit students have been loading up on debt to pay for class only to default on their loans after graduation.
But amid the turmoil, some more innocent companies have been grouped in with the incriminated. Bridgepoint is one of those. Yes, its student base has grown more than 17-fold in the past four years, but thanks to more rigorous acceptance standards, its students are less likely to default on their loans than those at competing for-profit schools. Best of all is the valuation -- with no debt and nearly 30% of its market cap in cash, Bridgepoint trades for a scant 2.7 times EBITDA. For a high-margin, debt-free business growing this fast, that's just silly cheap. And that's why I own it.
2. Berkshire Hathaway
Berkshire Hathaway (NYSE: BRK-A ) (NYSE: BRK-B ) needs no introduction. Warren Buffett's (now behemoth) brainchild offers a collection of high-moat businesses whose cash is reinvested by the investor with the greatest track record in our time.
You'd expect Berkshire's shares to trade at a premium, but today's price is far from it. At 1.1 times book value, this is about as low as Berkshire has ever been valued. And now shareholders have a floor on valuation -- Buffett is willing, able, and authorized by Berkshire's board to repurchase its own shares anytime they fall below 1.1 times book. This move means two things. First, Buffett thinks his shares are cheap. Just as important, though, is the second: Buffett thinks that his stock is more attractive today than other stocks. I agree; in my own models, I value Berkshire Hathaway at about $105 per B-share (vs. today's price of around $76).
3. Retail Opportunity Investments
In today's economy, there aren't a ton of jobs. There isn't much stability or consumer confidence. But you know what there is plenty of? Distressed commercial real estate. And that is great news for Stuart Tanz, CEO of Retail Opportunity Investments (Nasdaq: ROIC ) .
Retail Opportunity Investments Corp. (which shortens to the cleverly devised "ROIC," finance-speak for "return on invested capital") buys up distressed commercial West Coast real estate and turns the properties around. Stuart Tanz has spent a career doing this -- and not just these types of properties, but these exact properties. Since he was a teenager, Tanz has been working the Californian real estate markets. Imagine that you just walked into your favorite retail store and every single thing you wanted was on sale. That's what it feels like to be Stuart Tanz right now.
Armed with intimate property knowledge, stringent investment standards, and an initial $400 million in cash, Tanz has been strategically building up his dream real estate portfolio at prices unimaginable just a couple of years ago. And since ROIC is an REIT, it has to pay out most of its income in dividends. Over the next few years, the income power of Tanz's portfolio will ramp up, pumping out fat dividend checks and likely pushing up the share price. As a shareholder, I get to piggyback on Tanz's expertise and profit from all his work.
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