Warren Buffett disciples are always wondering which stock the Oracle of Omaha will add to the Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) portfolio next.
Of course, no one knows for sure where he'll place his bets, but we can certainly figure out which stocks out there might "feel at home" in today's Berkshire Hathaway family, based on some key metrics of the current portfolio. According to Capital IQ, these include:
- A median price-to-earnings ratio of 15
- A median price-to-book ratio of 1.9
- An average dividend yield of 3.1%
- An average beta of 0.87
We can further whittle down the list of potential Buffett ideas by eliminating stocks with spotty earnings histories, a new management team, or a complicated business model (or any combination of these). These are situations that the man himself has said he avoids.
So, with those things in mind, we'll take a look at five highly rated companies that fit the Berkshire profile and enlist the assistance of 110,000 investors participating in Motley Fool CAPS, as well as the new CAPS stock screener.
Here are a few of the results:
|
Company
|
Sector
|
P/E
|
Dividend Yield
|
CAPS Rating (out of 5)
|
|
ConocoPhillips (NYSE: COP)
|
Energy
|
11.8
|
2.1%
|
*****
|
|
Dow Chemical (NYSE: DOW)
|
Chemicals
|
11.7
|
4.9%
|
****
|
|
Energy Transfer (NYSE: ETP)
|
Energy
|
11.0
|
3.5%
|
*****
|
|
American Electric Power (NYSE: AEP)
|
Utilities
|
11.7
|
4.1%
|
****
|
|
EdisonInternational (NYSE: EIX)
|
Utilities
|
15.8
|
2.4%
|
****
|
Data provided by Motley Fool CAPS and Yahoo! Finance, as of July 8, 2008.
Not only do these five highly rated stocks meet valuation metrics similar to the current Berkshire portfolio, but also they are proven operators, have CEOs with at least three years on the job, and have easy-to-understand business models. On those grounds, at least, each of these companies wouldn't seem out of place in today's Berkshire portfolio.
So are these potential Buffett picks? Or does some flaw keep them out of contention? Make your voice heard on Motley Fool CAPS today, where 110,000 investors are waiting to see what you have to say.
Want to make money in up, down, and rollercoaster markets? Find out how. Claim your private invitation to a breakthrough new service from Motley Fool Co-founder David Gardner and team. Simply enter your email below.
Terms & Conditions
RSS Headlines
Fool UK