It's admittedly difficult to do while the coronavirus pandemic is still raging. But investors would be wise to look at this turbulence the same way legendary investor Warren Buffett looks at all market-wide stumbles ... as an opportunity.
That's not to suggest the Oracle of Omaha will buy any stock simply because it's been beaten down, of course. He's still a believer in the idea that you should only invest in businesses you understand, and that you should pick companies that you would feel comfortable holding for the long haul. That's a function of management as much as it is the business model.
And of course, Berkshire Hathaway's (BRK.A 0.46%) (BRK.B 0.61%) semi-retired chief continues to recommend buying stocks that are truly undervalued rather than stocks that are merely cheaper than they were a few weeks ago.
With that as the backdrop, here are three companies that aren't presently in Berkshire Hathaway's portfolio, but that look as if they belong there, based on Buffett's basic stock-picking rules. Even if he's not buying in, other investors looking to add some new holdings may want to consider any or all of these companies.
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1. Comcast: Adapting to change and growing
Yes, cord-cutting is slowly chipping away at the cable television business, and Comcast (CMCSA 0.57%) is arguably the powerhouse in that steadily shrinking space. It's hardly the sort of "built to last" business Buffett prefers.
Cable television, however, is actually one of the organization's least important business segments anymore. Last year, cable only accounted for a little more than one-fifth of its total revenue. Subsidiaries NBC and Universal provided nearly one-third of its income, and its British telecom subsidiary, Sky UK, contributed nearly one-fifth of its top line. Internet service was roughly another one-fifth of its business. While the cable TV industry may be slowly dying, it's dying because consumers are choosing streaming-video options that require high-speed broadband connections, which only Comcast and a few of its peers can provide.
In other words, the internet is now what the telephone was a couple of decades ago. People aren't going to give it up.
And Comcast is adapting. Led by savvy CEO Brian Roberts, the company is wading deeper into the same streaming-video waters that flow against cable television. In July, it will fully launch a streaming service called Peacock that offers access to a substantial amount of content from the Universal and NBC libraries, much of which won't be available through any other platform. (In light of the pandemic, Comcast pre-launched Peacock for its cable customers last week, though without the original programming it had planned.) Having control of both the medium and the media positions Comcast for significant control within the TV entertainment business, which in turn gives it pricing power.
Data source: Thomson Reuters/Refinitiv. Chart by author.
2. Tyson Foods: Boring, but consistently profitable
Buffett has had a particularly tough time with his Kraft Heinz (KHC 1.23%) position, which is now down 70% from its high in February 2017. In addition to the cost and pricing challenges it faced in common with most packaged food companies, Kraft Heinz went through a CEO change last year that led to some sweeping changes in its business strategies.
The food business itself is not the culprit, however. It's how these companies have been managed -- or perhaps mismanaged -- in the past that has made many of them so problematic now. Kraft Heinz, for example, has arguably suffered more than benefited from 3G Capital's involvement with the deal that made the company what it is today.
Tyson Foods (TSN 1.36%) has mostly managed to sidestep the issues that seem to be standing in the way of rivals, however. Revenue has grown reliably (if slowly) by single-digit percentages for most of the past several years, and analysts anticipate that continuing for the foreseeable future. Earnings growth has been (and should continue to be) about as consistent.
Data source: Thomson Reuters/Refinitiv. Chart by author.
Is Tyson Foods boring? Absolutely. But, that's the point. There's little growth in store for the company, but consumer staples (and especially foods) are perpetually marketable. The consistent dividend, which currently yields 2.63%, isn't too shabby either.
3. Tractor Supply: Serving a consistent market segment well
Finally, add Tractor Supply Company (TSCO 1.56%) to your list of names Buffett wouldn't likely mind holding in his portfolio for the long haul.
It's a traditional brick-and-mortar retailer during a period that has been dubbed the retail apocalypse, but it's different from most of its peers in one significant way. Tractor Supply -- as the name suggests -- largely serves farmers, gardeners, and outdoorsy DIYers.
That's a market that isn't going to abandon it anytime soon. While these shoppers could find much of what Tractor Supply sells on e-commerce sites such as Amazon, Tractor Supply's consistent sales growth suggests that its core customers prefer to shop for those supplies in person. Moreover, much of its inventory is too bulky, heavy, or fragile to be easily or cheaply sold online and shipped. Indeed, once the pandemic-necessitated business closures end, many consumers may start shopping for items that will help them to be more self-sufficient during the next crisis, whatever that may be. That plays right into the hand Tractor Supply is holding. And those who don't want to venture out just yet will appreciate the fact that every Tractor Supply store now offers same-day delivery.
Data source: Thomson Reuters/Refinitiv. Chart by author.
Buffett would probably be a fan of the retailer's management team too. Hal Lawton was only made CEO at the beginning of this year. He's a former Macy's guy, which isn't necessarily relevant experience. But, he's also a former Home Depot and eBay executive. It's pretty clear he's got a good understanding of modern consumerism and how various challenges can be addressed.
