One of the most admired investors in history is Warren Buffett, who, having amassed a 12-digit fortune is now donating 99% to charity. Buffett’s old-school approach to value investing has delivered him an army of fans worldwide. Today, I highlight a FTSE 100 stock that the Sage of Omaha may well admire.
Wise words from Warren Buffett
Over decades, the investing legend has repeatedly distilled his investing principles into pithy quotes. Here are four favourites relevant to my FTSE 100 pick:
1. “Only invest in simple businesses that you understand.” For me, this business may be simple, but it operates supremely well.
2. “All there is to investing is picking good stocks at good times and staying with them as long as they remain good companies.” I think my FTSE 100 pick is an outstanding company and available at a fair share price today.
3. “Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.” If the FTSE 100 closed for a decade, I know this firm would survive and thrive, just as it’s doing during Covid-19.
4. “Whether we’re talking about socks or stocks, I like buying quality merchandise when it is marked down.” Today, shares in this winner are marked down nearly a quarter from their 2019/20 high.
Raise your glasses to a FTSE 100 champion
Can you guess what my champion is? It’s Diageo (LSE: DGE), a global leader in alcoholic drinks and a true British champ.
I don’t often admire businesses, but Diageo really is a class act. This firm (formed by a 1997 merger) has a pedigree going back to 1627 – when Charles I ruled England and still had his head! Its cupboard is filled with around 200 top drinks brands (including 23 of the top 100 worldwide), sold in 190 different countries.
In bars, pubs and clubs on every continent, Diageo brands are on display, such as Guinness stout, Smirnoff vodka and Baileys Irish Cream. Thus, this it has been giving drinkers – but never its shareholders – hangovers for almost four centuries.
All the numbers demonstrate that Diageo is a world leader. It employs around 30,000 people and has a market value nearing £65bn, making it a true FTSE 100 giant.
This share traded as low as 2,050p on 24 March, during the depths of the market crash. However, at 2,783p, Diageo shares today languish 23% below their 12-month high and almost a fifth (19%) lower over the past year.
Despite rising more than £7 from their 2020 low, I believe Diageo shares remain a good buy. They trade on a multiple of 21.7 times earnings, which isn’t cheap, but FTSE 100 quality never is. Earnings per share of 128p cover the 69.9p dividend by 183%, which is a sound margin of safety. Lastly, the dividend yield of 2.5% is respectable and has plenty of room for growth.
In summary, I believe FTSE 100 stalwart Diageo is another Buffett business. As the master says: “Price is what you pay. Value is what you get.” That’s why I’d buy Diageo shares today.
With global markets in turmoil as the coronavirus pandemic tightens its grip, turning to shares to generate income isn’t as simple as it used to be…
As the realities of ‘life under lockdown’ begin to bite, many of the stock market’s ‘go-to’ high-yielding companies have either taken an axe to their dividend pay-outs… or worse, opted to suspended them altogether – for the near-term at least.
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Our analyst has unearthed what he believes could be a very attractive option for income- seeking investors – a company that, in his view, boasts a ‘reliably defensive’ business model, combined with a current forecast dividend yield of 4.2% to boot!*
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*Please be aware that dividends are variable and not guaranteed.
Cliffdarcy has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.