Here at the Fool, our analysts write a lot of different things about a lot of different companies. However, you don't often hear details about what are our experts are doing in their own portfolios, which could be the best kind of investment advice you can get. After all, what could be a better endorsement of an investment than an analyst putting their own hard-earned cash behind a recommendation?
Understanding the reasons why a stock was bought it in the first place is what will make you a better investor. With that in mind, here are five stocks that some of our analysts recently bought for their personal portfolios, and the reasons they decided to pull the trigger on them.
I recently bought shares of online travel portal priceline.com (NASDAQ:BKNG). As a value investor, I look for companies whose shares have recently suffered substantial declines, and Priceline took nearly a 25% hit from its 2014 high as investors became increasingly uncomfortable with some of the challenges facing the travel company. Specifically, the strong U.S. dollar threatened to hurt Priceline's results, especially given the company's emphasis on its international travel offerings. Moreover, some analysts cited the potential for increased competition, especially as Internet-based portals from other countries started to build momentum and encroach on Priceline's prime territory.
When traders bid down share prices because of short-term concerns, it's a great time for long-term investors to buy. Despite its past success, Priceline still has plenty of room to gain a greater foothold in many lucrative markets around the world. With its recent decline, Priceline's valuation looks unusually attractive, which opens up an opportunity to buy shares for the long haul. Priceline should benefit when the dollar's strength reverses at some point in the future; that, combined with a rising middle class throughout the world that is hungry for travel, could make today's price look like an even bigger bargain than Priceline's travel deals.
First, Berkshire is one of the best-run companies in the world, and it has an excellent portfolio of subsidiary companies and stocks. Investing in Berkshire is the only way to get a piece of great companies such as GEICO, The Pampered Chef, Clayton Homes, and NetJets, to name a few.
The company's stock portfolio also consists of a long list of names that I have considered buying recently, including American Express (NYSE:AXP), Goldman Sachs (NYSE:GS), Procter & Gamble (NYSE:PG), and Wells Fargo (NYSE:WFC). Instead of buying all of these stocks individually, why not purchase the company that owns a piece of each?
Perhaps my biggest reason for buying Berkshire is because I think there is a strong possibility we'll finally see a significant market correction in 2015, and Berkshire has outperformed the market without fail during negative years. In fact, the S&P 500 has finished in negative territory in 11 of the past 50 years, and Berkshire has outperformed the market every single time.
So, not only is Berkshire a great collection of companies that should deliver strong long-term performance, but it's also a great defensive play against a potential market downturn.
My latest buy was Disney (NYSE:DIS). I was (and remain) impressed by its commanding presence in every conceivable niche of entertainment -- movies, TV, theme parks, toys, etc. Much of this is due to the company's expert leveraging of its intellectual property, as hit movies spawn popular toys, TV series, and the occasional theme park ride.
In 2014, all five of its divisions saw higher revenue and operating profit on a year-over-year basis, even the traditionally sluggish interactive unit. These robust performances helped lift overall attributable net profit by 22%, to $7.5 billion.
Disney is also treating its stockholders right. For 2014, the company declared an annual dividend of $1.15 per share, more than one-third higher than the previous amount.
"The Mouse" also has a luminously bright future. For example, this year it is scheduled to unspool its first movie in the refreshed Star Wars film series, and to open a new theme park resort in Shanghai, China, that will doubtless be obscenely popular.
This company knows how to give the public the entertainment it wants, and how to make shareholder-pleasing returns while doing so. I'm glad I bought Disney shares, and I plan to hold them for a long time.
I recently bought American Express (NYSE:AXP) in large part because some incredible trends set it up for decades of continued growth. As common as credit and debit cards are in developed countries, the majority of transactions in developing countries are still done in cash. Technology is beginning to change this, with mobile payments growing quickly in many places. Apple Pay and other technologies are rolling into our smartphones, and the credit and debit card operators are doing the heavily lifting: operating the networks, paying the merchants, and billing or debiting the customers.
The global middle class is expected to increase by 1 billion by 2035, creating even greater demand for consumer credit. American Express is one of the most trusted and respected names in the business, both from the merchant and consumer side.
From an investing value perspective, American Express is about as good as it gets at returning value to shareholders:
One of the best management teams in the business has consistently raised the dividend -- though the payout did plateau over the recession -- while also regularly buying back shares, which results in more per-share cash generation over time. This stock will be in my portfolio for decades to come.
Glaxo has had its fair share of problems in recent years. Sales of Advair, its blockbuster respiratory drug, fell by 13.5% year over year to $5.2 billion in the first nine months of 2014 due to rising competition. What's more, sales of Anoro Ellipta and Breo Ellipta, two new respiratory drugs it was hoped would offset those losses, got off to a sluggish start. The company has been hit by bribery probes in multiple countries. It also agreed to a deal in which it swapped its high-growth oncology segment for Novartis' (NYSE:NVS) slow-growth vaccines business.
Yet these storm clouds are lined with silver. The swap with Novartis should reduce research and development costs while generating more predictable returns, which could lessen earnings volatility and allow the company to raise its dividends. Glaxo is mulling a spin-off and IPO for ViiV Healthcare, its majority-owned joint HIV venture with Pfizer (NYSE:PFE) and Shionogi, which could offer investors a piece of a higher-growth company. Glaxo also has 18 drugs in phase 3 development, so its pipeline isn't exactly barren.
The company also trades at just 17 times trailing earnings, making it cheaper than Pfizer, AstraZeneca (NYSE:AZN), and Merck (NYSE:MRK) on a P/E basis. Glaxo also has a higher forward dividend yield (5.4%) than all three companies, although its 12-month payout ratio has occasionally topped 100%. In a nutshell, expectations and valuations are low for GlaxoSmithKline, but its yield remains high, which could make it an interesting income play for contrarian investors.
Dan Caplinger owns shares of Berkshire Hathaway, Priceline Group, and Walt Disney. Eric Volkman owns shares of Walt Disney. Jason Hall owns shares of American Express, Berkshire Hathaway, and Wells Fargo. Leo Sun owns shares of Pfizer and Walt Disney. Matthew Frankel owns shares of Berkshire Hathaway. The Motley Fool recommends American Express, Berkshire Hathaway, Goldman Sachs, Priceline Group, Procter & Gamble, Walt Disney, and Wells Fargo. The Motley Fool owns shares of Berkshire Hathaway, Priceline Group, Walt Disney, and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.