Legendary investor Warren Buffett has imparted his investing advice for many decades now, chiefly through his annual letter to shareholders.
For instance, in Berkshire Hathaway’s most recent letter, Buffett wrote that “our prime goal in the deployment of your capital is to buy ably-managed businesses, in whole or part, that possess favorable and durable economic characteristics. We also need to make these purchases at sensible prices.” This is great wisdom for any investor to keep in mind.
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Buffett’s best buys
Warren Buffett’s top four holdings in December 2018 were Apple, Bank of America, Wells Fargo and Coca-Cola. Today I’m looking at similar investments that could be made on this side of the pond.
How about banking? Although the banking sector is a favourite of Buffett’s, with so much economic uncertainty, clouding the UK now, it’s possibly not the safest area to invest in.
The Lloyds Bank (LSE:LLOY) share price has risen 7% in the past three months and has many appealing features including a generous 5.4% dividend yield and price-to-earnings ratio (P/E) of 10.7. Its PEG factor is 0.4 and a value of less than 1 can indicate a company is undervalued, so this caught my eye. However, there is no getting away from the external pressures on the bank, such as costs incurred from the PPI mis-selling scandal and increasing opposition from streamlined FinTech competitors.
According to the Office for National Statistics, employment fell by 58,000 in the three months to September, which is the biggest fall since May 2015. Wage growth has also slowed. This could mean further interest rate cuts are on the cards, which does not bode well for big banks such as Lloyds.
So, moving on from banking, what about consumer goods?
Britvic share price
FTSE 250 drinks company Britvic (LSE:BVIC) may not be in the financial realms of Coca-Cola, but it has proven to be a worthy winner this past year, with its share price up almost 25%. Although I think future growth may already be priced in, it’s one to consider on a dip. So, if the upcoming general election brings swings in share prices, which I think are inevitable, then this would be a great chance to jump on board long-term holdings such as Britvic. It has earnings per share of 44p, a P/E of 21 and a dividend yield of 3%.
Some of its brands include Robinsons, Lipton and R Whites and it also has the licence to sell Pepsi Max in the UK. It has withstood the sugar tax challenge well with its range of sugar-free offerings and I think its well-loved brands would hold up in a recession too.
If you want to emulate Warren Buffett but don’t want to buy individual shares outright, you could look at a fund such as a global ETF targeting US stocks. This will give you exposure to a big collection of stocks. An ETF such as iShares NASDAQ 100 UCITS ETF tracks an index whose constituents include tech giants Apple, Microsoft, Amazon, Facebook and Alphabet, along with Pepsi.
UK recession fears could sink shares further before they rise again, but this gives savvy investors the perfect opportunity to buy up bargains on the dip. If you’d rather err on the side of caution, then buying into an ETF dilutes your risk and gives you a small piece of some huge pies.