Warren Buffett needs no introduction. His company draws tens of thousands of followers every year to Omaha for its annual shareholder meeting. Investors scrutinize his every word. Companies like Goldman Sachs, General Electric, and Bank of America have given him amazing investment opportunities merely for the status of being worthy of his notice.
Every quarter, investors pore over Buffett's latest disclosures, trying to discover what stocks he thinks are poised to perform the best. Whether it's his long-ago acquisition of shares of Coca-Cola or the more recent landmark purchase of Burlington Northern Santa Fe, people are always looking for hints about where the Oracle of Omaha wants to put his money next.
Interestingly enough, though, most people overlook one stock that Buffett owns. It's unquestionably made him more money than any other pick he ever made. It's a stock that many lucky investors have ridden for decades to truly amazing returns. And although for much of its history, naysayers criticized the stock for never paying a dividend and carrying too high a price tag, that hasn't led this company to change a single thing about how it does business -- and for most of its shareholders, that's exactly how they'd like things to go well into the future.
Much of the time, even Buffett has rejected buying this stock. But in the third quarter of 2011, he changed his tune, saying that the time looked ripe to make an exception to that long-held rule and open up his wallet to pick up shares on the cheap -- and actually managed to buy about $18 million of the stock during that quarter.
It may surprise you, but the stock that Buffett only recently started pushing heavily as a value proposition is his own company, Berkshire Hathaway. There's no denying the amazing wealth that Berkshire has produced for long-term shareholders. With the company's book value having jumped an astounding 513,000% from 1964 to the end of 2011, the original Class A shares of Berkshire stock recently fetched over $140,000 per share, giving a hint of their appreciation from their much more modest levels in the 1960s and 1970s.
Even at those six-figure prices, though, billionaire Buffett thinks Berkshire shares are cheap -- and he's been putting his money where his mouth is. Recently, Berkshire bought back a substantial block of stock from the estate of a long-time shareholder, establishing a new policy authorizing buybacks when the stock trades at less than 1.2 times book value. Yet even with that increase from the previous authorization of 1.1 times book value. Berkshire still doesn't trade very far above that buyback price, fetching a book-value multiple of less than 1.3. With what amounts to an implicit floor under the stock, anyone who buys Berkshire stock right now at current prices has very little to lose -- and all the upside that the Oracle of Omaha provides even at his advanced age of 82.
Value stocks can provide long-term gains that rival those of the top growth stocks. But even investors who invest with a decades-long time horizon still like to see more tangible profits along the way.
Click to the next page to find a stock that combines solid growth prospects with the added benefit of putting a check in your hand every quarter.