Warren Buffett is seen as the world’s greatest investor. Over decades, Buffett, or the Oracle of Omaha as he’s known, has acquired a multi-billion dollar fortune by investing in stocks and shares.
He’s highly selective when picking assets for his portfolio. He can go for years without placing any large deals and spends hours reading up on companies before deciding to buy.
Buffett rarely invests outside of his home market in the United States. However, I believe there are several companies here in the UK’s FTSE 100 that he could appeal to him.
Warren Buffett-style investments
Warren Buffett was once Tesco’s third-largest shareholder. By 2012 he owned 5% of the business. I believe Buffett bought Tesco because he liked the company’s then management. He also likes to own stocks with a strong competitive advantage, which Tesco has as the UK’s largest retailer.
Unfortunately, following the accounting scandal in 2014, Buffett decided to sell his investment. The investor said he sold because of the company’s accounting problems and a lack of confidence in management.
Since then, the company’s management has changed, and the accounting problems have been dealt with. The group still has the qualities it had in 2006, but it’s now in a better financial position. It has reduced borrowings and improved its competitive position with the acquisition of Booker.
This doesn’t guarantee that the company will uncover no other problems. There may be another accounting scandal lurking on Tesco’s balance sheet. As is the case with any other investment, it’s impossible to predict the future. Tesco also faces other risks such as increased competition, higher wages and additional taxes.
Still, I believe that if Warren Buffett reviewed the business again today, he might decide to buy back in.
FTSE 100 takeover
Buffett has never owned Unilever, but it was the target of a £115bn bid from Kraft Heinz in 2015. His conglomerate owns around a third of Kraft Heinz.
Kraft and Unilever have a lot in common. Both companies own portfolios of well-known and valuable consumer brands. The big difference between the two businesses is that one is primarily a US-based enterprise, while Unilever generates more than 50% of its sales in emerging markets. This exposure to fast-growing emerging markets may help Unilever grow faster than some of its peers. I think Unilever also has a lot in common with the likes of Coca-Cola, which has been a staple in Buffett’s portfolio for decades.
Of course, just because a business with Buffett’s backing has shown interest doesn’t mean the Oracle of Omaha would buy Unilever. Nor does it suggest the stock is a risk-free investment. As with all stocks and shares, Unilever has its own risks such as sluggish growth for its branded products if consumers turn to cheaper alternatives.
Even Warren Buffett loses money. He lost nearly $500m selling Tesco after shares in the group slumped following its accounting scandal. Just because he has expressed an interest in these businesses does not necessarily mean they are going to be good investments. Every investment should be considered in the context of an individual portfolio.
Nevertheless, I believe that Warren Buffett’s past association with these businesses suggests he could revisit them at some point in future.
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Rupert Hargreaves owns shares in Unilever. The Motley Fool UK has recommended Tesco and Unilever. 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.