Warren Buffett - Two More Top Holdings, Loving the Low-Cost Operator
It's been a busy news week for Warren Buffet with the release
of Berkshire Hathaway's Annual Report (
). In typical fashion,
single-handedly added the iconic word "subpar" to the American
vernacular, an unlikely way to describe his company's 2012
performance that shows a book value grew by $24.1 billion.
Buffett reported to shareholders that the Berkshire book value
increased by 14.4% in 2012, compared with the 16% total gain of
S&P 500. For the years from 1965 to 2012 (48 years),
Berkshire book value gained 19.7% a year, while the S&P 500
gained 9.4% a year. Read the highlights here:
Buffet's latest shareholder letter also said that Berkshire's ownership interest in all four companies (American Express ( AXP ), Coca-Cola ( KO ), IBM ( IBM ) and Wells Fargo ( WFC )) is likely to increase in the future. Read the full article about Buffet's top four companies: http://www.gurufocus.com/news/210594/highlight-of-warren-buffett-shareholder-letter-and-berkshire-hathaway-2012-results
Today's focus is on two more of Warren Buffett's top holdings in a select portfolio of companies he holds long term: Procter & Gamble Co ( PG ), and Wal-Mart Stores, Inc. ( WMT ). These two companies demonstrate Buffett's appreciation of the low-cost operator.
Warren Buffet's fifth place holding is Procter & Gamble Co ( PG ), with a portfolio weighting of 4.8%, and 52,793,078 shares. Despite a top ten ranking, PG's relationship with Berkshire sounds a little like a romance gone wrong.
Unloading shares of PG gradually, Buffett he described himself as being "weaselly" in dishing his reasons for falling out of love with the giant maker of numerous brands of dog food, toilet paper, deodorant, batteries, shampoo, cleaners, cosmetics--products sold in more than 180 countries. With PG, Berkshire has clearly demonstrated the difference between owning a company versus just holding shares.
Over the past 6 years, Buffett cut his PG shares in half. Starting in 2007, Berkshire Hathaway (BRK.A) held 101 million PG shares, and then reduced to 91 million shares the following year. In 2009, he unloaded another 8 million shares. After that, Buffett held steady at 72 million shares for the next two years. Today, Buffet has 52,793,078 shares of PG, valued at $3.58 billion, and still in his top ten holdings. Track Warren Buffet's Procter & Gamble ( PG ) holdings:
Although elusive in his critique of PG, Buffett has suggested that PG had pricing issues and was not a low-cost operator like Wal-Mart. In a 2012 interview with CNBC, Buffet said, "People that are low-cost operators have an advantage. And P&G has been selling higher-end products generally compared to private labels that were available."
Procter & Gamble Co. was founded in 1837, and incorporated in Ohio in 1905. The company has a market cap of $210.47 billion; its shares are currently traded at around $77.05 with a P/S ratio of 2.7 and a Shiller P/E Ratio of 17.9, ranked higher than 82% of the 28 Companies in the industry. GuruFocus rated Procter & Gamble Co. with the business predictability rank of 1-star. For a detailed history and analysis of Procter & Gamble:
Warren Buffett's sixth place holding is Wal-Mart Stores Inc. ( WMT ), with a portfolio weighting of 4.3%, and 47,501,182 shares. Once called a "Wal-Mart believer," Buffet loves this low-cost operator. Thanks to Sam Walton's understanding of inventory turnover as the key to discount retail, Wal-Mart controls inventory turn better than its competitors, and therefore requires less capital. Wal-Mart is also great at the science of estimating revenue with "probable recurrence" purchases in the food department. Customers typically buy on a weekly basis and the purchases are repeated; tracking this is also a key to inventory planning, i.e. getting the right amount of product on the shelf at the right time, with little waste. According to Buffett, "...You want to be with a low-cost operator. Now, that's an advantage that Wal-Mart ( WMT ) has, that's an advantage a Costco ( COST ) has, and you can look throughout the field."
Wal-Mart Stores Inc. was incorporated in Delaware in October 1969. Wal-Mart Stores Inc. has a market cap of $247. 28 billion; its shares are traded currently at $73.72. GuruFocus rated Wal-Mart Stores Inc. with the business predictability rank of 5-star.
To discover Wal-Mart's P/E ratio and P/S ratio and more: http://www.gurufocus.com/stock/WMT
Warren Buffett's Wal-Mart ( WMT ) holdings:
Warren Buffett's Top Buys, Top Sales and Top Holdings:
Here is the complete portfolio of Warren Buffett.
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2. Warren Buffett's Top Growth Companies
3. Warren Buffett's High Yield stocks
4. Stocks that Warren Buffett keeps buyingAbout GuruFocus: GuruFocus.com tracks the stocks picks and portfolio holdings of the world's best investors. This value investing site offers stock screeners and valuation tools. And publishes daily articles tracking the latest moves of the world's best investors. GuruFocus also provides promising stock ideas in 3 monthly newsletters sent to Premium Members .