Between 1965 and 2012, the S&P 500 compounded annual gain averaged 9.4%. Warren Buffett's firm Berkshire Hathaway experienced compounded annual gains averaging 19.7%. If you want to get rich, studying Warren Buffett's portfolio is a good place to start. Berkshire Hathaway owns shares of all of the companies analyzed in this article.These stocks provide investors with diversification and long-term growth potential.
An aerospace industry gem
Precision Castparts (PCP +0.00%) manufactures metal components and products and provides investment castings for aerospace and industrial gas-turbine applications. Precision Castparts has an impressive portfolio of clients including Airbus, Boeing, GE, and Rolls-Royce.
Precision Castparts (PCP +0.00%) manufactures metal components and products and provides investment castings for aerospace and industrial gas-turbine applications. Precision Castparts has an impressive portfolio of clients including Airbus, Boeing, GE, and Rolls-Royce.
Earlier this year, news broke that at the Dubai Air Show, airlines and individuals spent more than $150 billion on new aircraft. While there is competition between companies like Airbus and Boeing for share of the commercial airliner market, Precision Castparts wins no matter which company gets more orders because it provides parts for a large portfolio of aerospace companies. Precision Castparts is well-positioned to take advantage of growth in the aerospace industry. According to Precision Castparts' website, "With few exceptions, every aircraft in the sky flies with parts made by PCC." A healthy airline industry in 2014 means a healthy year for Precision Castparts.
Precision Castparts also had a stellar second-quarter earnings report. Sales increased 23% from $1.9 billion in the prior-year quarter to $2.4 billion in Q2 2013. Net operating income increased 28% from $332 million last year to $425 million this year. EPS continued to grow, rising from $2.27 last year to $2.90 this year.
The star of paid programming
Starz (STRZA +0.00%) is a global media and entertainment company. It provides subscription video programming on domestic American pay-television channels, global animated television, global content-distribution, and movie production.
Starz had a great third quarter, highlighted by the company's record-high 22 million subscribers. Subscriptions are up 6% year over year. Starz also reported 11% revenue growth. Starz CEO Chris Albrecht said the company would focus on ramping up original-series production in the coming years. Starz is launching at least four new programs this year: Black Sails, Outlander, Fortitude, and Power. Black Sails received positive feedback at San Diego Comic-Con, which can be an early indicator for potential success of new TV shows. Starz is so confident in Black Sails that it bought a second season of the show before the first episode premiered on TV.
This tactic proved to be a great move for the content streaming company Netflix, which has debuted multiple original series over the last two years. Netflix also reported plans to double its investment in original content and programming in 2014. Starz could also expand its revenue streams by introducing exclusive online content to compete with Netflix.
Health care for the average Joe
Torchmark (TMK 1.65%) is a holding company specializing in life and supplemental health insurance for "middle income" Americans. Torchmark's products are marketed through multiple distribution channels, including direct response and exclusive and independent agencies.
Torchmark has an aggressive share-repurchasing program. In the third quarter it spent $85 million to buy 1.2 million Torchmark shares at an average cost of $70.45 per share. In its third-quarter earnings call, CFO Frank Svoboda said: "We will use our cash as efficiently as possible. If market conditions are favorable, we expect that share repurchases will continue to be the primary use of the remainder of the funds." Because Torchmarket hasn't taken on much debt and the company's revenue and income growth are healthy, share buybacks seem an appropriate use for extra capital.
Multiple analysts have raised concerns about the impact the Affordable Care Act will have on Torchmark. Investors should keep an eye out for Torchmark's fourth-quarter earnings report and see how the discontinuation of several limited-benefit health products affect Torchmark's revenue. I believe the company's growing client base will make up for the lost revenue on some of the limited benefit health products.
In Torchmark's third-quarter earnings report, one of the company's co-CEOs stressed the importance of penetrating unsaturated insurance markets in the United States. Two of Torchmark's subsidiary insurance sellers are opening new offices in the fourth quarter. By expanding into untapped pools of uninsured Americans, Torchmark will be able to grow revenue. Barclays also raised its price target on Torchmark from $82 to $90 last Tuesday and maintained its "overweight" rating on the stock.
Foolish takeaway
All three of these companies offer great long-term investment opportunities and are leaders in their respective industries. Investors can also take comfort in knowing that these stocks are backed by one of the world's most successful investors. You can keep track of Berkshire Hathaway's activity on the stocks through its 13F statements, available in the SEC's EDGAR database.
All three of these companies offer great long-term investment opportunities and are leaders in their respective industries. Investors can also take comfort in knowing that these stocks are backed by one of the world's most successful investors. You can keep track of Berkshire Hathaway's activity on the stocks through its 13F statements, available in the SEC's EDGAR database.
