The FTSE 100 reached record highs this week. That means, in general, that buying UK shares has never been more expensive.
As a result, I’m casting my net a bit further afield. By looking over to the US, I’m hoping to diversify my portfolio and find some great investment opportunities.
Berkshire Hathaway
Top of my list at the moment is Warren Buffett’s company, Berkshire Hathaway (NYSE:BRK.B). The business has a lot of qualities that I look for in an investment.
Berkshire is a conglomerate with a number of smaller businesses as subsidiaries. These include insurance companies, a railroad, and a utilities operation.
This means that the business is reasonably well diversified by itself. There’s a common theme in that it’s focused on the US, but it has a number of different revenue sources.
The key to the company’s success is its discipline. It avoids taking excessive risk in its insurance operations and is careful not to overpay when it makes investments.
I think that the risk with the company is relatively low, but if there is one, it’s growth. Berkshire’s enormous size makes it hard for the company to grow at the rate it used to.
At today’s prices, though, I consider the stock a bargain. And its decentralised culture means that I expect it to continue to do well even without Buffett in charge.
Johnson & Johnson
I also think that there’s a rare opportunity in Johnson & Johnson (NYSE:JNJ) shares. The stock currently trades at a price-to-earnings (P/E) ratio of 16.
In my view, that’s not at all bad for a business that has consistently grown its earnings over the last decade. And the stock is down 11% since the start of the year.
The reason the stock has been falling is because there’s a risk here, though. The company is dealing with lawsuits relating to its baby powder, which could get expensive.
Johnson & Johnson attempted to sidestep the problem, but was blocked from doing so by the courts. The uncertainty about what costs the company might face is weighing on the stock.
I think there’s an opportunity here, though. The falling share price looks to me like an overreaction.
Buffett’s success with American Express came from buying the stock when it was dealing with a scandal of its own. I’m looking to buy Johnson & Johnson shares for a similar result.
Polaris
Lastly, I’m looking at a company called Polaris (NYSE:PII). The company is a leading manufacturer of off-road vehicles.
Polaris isn’t as well-known as Berkshire Hathaway or Johnson & Johnson. But I think there’s an impressive business here.
The company achieves a 70% return on its fixed assets. I think that’s impressive, especially for a manufacturing business.
This is partly the result of strong brand power. Polaris is the market leader in the all terrain vehicles industry, with around 23% of the global market.
Importantly, the stock doesn’t look expensive at the moment. It trades at a price-to-earnings (P/E) ratio of less than 12.
The main risk is that the macroeconomic outlook doesn’t look promising. A recession is a concern for Polaris, with discretionary purchases from customers likely to slow down.
I see this as a short-term headwind, though. Over time, I expect the company’s assets and economic characteristics to prove durable and generate a good return for investors.
