Stocks have moved a long way in five years, making it a challenge for the world’s best living investor to find undervalued situations. “[Stocks] are probably more or less fairly priced now. We don’t find bargains around,” Warren Buffett told CNBC last week. “But we don’t think things are way overvalued either. We’re having a hard time finding things to buy.”
Perhaps Buffett, CEO and Chairman of Berkshire Hathaway (BRK.A, Financial)(BRK.B, Financial), will elect to purchase more of some of his current holdings, as three slid to their 52-low stock prices this week, compared to a 16.5% gain for the S&P 500: International Business Machines Corp. (IBM, Financial), Deer & Co. (DE, Financial) and Coca-Cola Co. (KO, Financial).
IBM (IBM)
Buffett purchased almost 64 million IBM shares over 2011 at average prices ranging from $159 to $185 per share. He revealed that he spent nearly $11 billion on IBM in a CNBC interview on Nov. 14, 2011, after reading the annual report every year for 50 years and getting “a different slant on it.”
Purchasing continued over the next five quarters until Buffett’s holding totaled 68,121,984 shares at the end of 2013’s first quarter. This equals 6.22% of the company, making Berkshire Hathaway the largest IBM stakeholder. It also ranks as his third-largest holding at 14.6% of his portfolio.
With an average purchase price Buffett paid of $172.80 per share, he has an approximately 7% average gain at the stock’s current price of $184.19.
But the current price is 1.7% above a 52-week low price of $181.10, the stock declined roughly 13% over 12 months. The 52-week high is $215.90 per share.
The company’s most substantial stock decline occurred in April when it released first-quarter results a 1% decline in GAAP earnings and 5% decline in revenue from the first quarter the previous year, due to not closing a number of expected software and mainframe transactions which it moved to the second quarter.
In the second quarter, revenue fell 3% and net income declined 17% over the previous year, and lowered its full-year 2013 GAAP diluted earnings per share guidance from at least $15.53 to $15.08. The greatest areas of revenue growth were Smarter Planet and Cloud, up more than 25% and 70% respectively in the first half.
IBM has produced 6.6% annual revenue growth and 12.1% annual EBITDA growth rates over the past 10 years:
GuruFocus analysis shows that the company has an expanding operating margin, a dividend yield close to a three-year high and a P/E ratio close to a three-year low at 13.26. Negative signs are revenue per share growth slowdown, a P/B ratio close to a 10-year high at 12.79 and the issuing of $7.7 billion in new debt over the past three years though its debt level is acceptable.
Deer & Co. (DE)
Berkshire Hathaway holds 3,978,767 shares of Deer & Co., purchased in the third quarter of 2012 and untouched since. The price that quarter was $78 on average, 5% lower than the current price of $82.26, which is down half a percentage point from a year ago. The holding comprises 0.36% of the portfolio.
Deere is trading at roughly 3.4% above its 52-week low price of $79.50. The stock reached a 52-week high of $95.60 in January.
Deere is a tractor and heavy machinery company that is seeking to capitalize on the macro-trends of global population growth and income growth in developing nations, which are fueling demand for agriculture and infrastructure.
The company has clear-cut goals, outlined in a February 2013 presentation: to expand globally and achieve enterprise net sales of $50 billion at mid-cycle by 2018, a minimum operating margin of 12% at mid-cycle 2014, and asset turns of 2.5 times at mid-cycle by 2018.
For full-year 2012, Deere had revenue of $36.2 billion and an operating margin of 13.1.
In its third-quarter earnings release dated Aug. 14, the company recorded worldwide net sales and revenues up 4% and net income up 26% over the third quarter last year to a record $997 million, after both sales and earnings hit records in the second quarter. The company also raised its full-year income guidance to $3.45 billion from the $3.3 billion projected a quarter earlier.
GuruFocus shows five positive signs for the company: per-share revenue growth, a three-year-high dividend yield, and P/E, P/B and P/S ratio each close to a three-year low. Negative signs include operating margin decline for five years, cash flow divergence from reported earnings, and the issuing of $10.5 billion of debt over the past three years.
Coca-Cola Co. (KO)
Buffett has a 9% stake, or 400 million shares, which comprises 18% of his portfolio and makes him the company’s top shareholder. Buffett appeared at Coke’s annual meeting in April and said he would “never sell a share of Coke stock.”
Coke shares have declined 2% over the past year, to a price of $37.14 on Thursday, which is 4.5% above their 52-week low of $35.58.
Coke has recorded annual revenue growth of 10.9% and annual EBITDA growth of 9.6% rates over the past 10 years, and 13.8% and 9% respectively over the past five years.
Growth diminished in the first quarter of this year, with revenue declining 1% and a 13% decline in earnings per share. The second quarter saw revenues decline 3% and EPS down 3%. Global volume grew 4% and 1% in the first and second quarters, respectively.
GuruFocus analysis shows that the company has shrinking gross and operating margins, and that assets are growth faster than revenue. The company has also seen slowing revenue per share growth in the past 12 months and has issued $14.4 billion of debt over the past three years, though the current debt level is acceptable. Good signs are that its P/E ratio at 20.33 is close to a one-year low, and P/B at 5.28 is close to a one-year low.
See more of Warren Buffett’s stocks, go to his portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of Warren Buffett.
Not a Premium Member of GuruFocus? Try it for free for 7 days here.
Perhaps Buffett, CEO and Chairman of Berkshire Hathaway (BRK.A, Financial)(BRK.B, Financial), will elect to purchase more of some of his current holdings, as three slid to their 52-low stock prices this week, compared to a 16.5% gain for the S&P 500: International Business Machines Corp. (IBM, Financial), Deer & Co. (DE, Financial) and Coca-Cola Co. (KO, Financial).
IBM (IBM)
Buffett purchased almost 64 million IBM shares over 2011 at average prices ranging from $159 to $185 per share. He revealed that he spent nearly $11 billion on IBM in a CNBC interview on Nov. 14, 2011, after reading the annual report every year for 50 years and getting “a different slant on it.”
Purchasing continued over the next five quarters until Buffett’s holding totaled 68,121,984 shares at the end of 2013’s first quarter. This equals 6.22% of the company, making Berkshire Hathaway the largest IBM stakeholder. It also ranks as his third-largest holding at 14.6% of his portfolio.
With an average purchase price Buffett paid of $172.80 per share, he has an approximately 7% average gain at the stock’s current price of $184.19.
But the current price is 1.7% above a 52-week low price of $181.10, the stock declined roughly 13% over 12 months. The 52-week high is $215.90 per share.
The company’s most substantial stock decline occurred in April when it released first-quarter results a 1% decline in GAAP earnings and 5% decline in revenue from the first quarter the previous year, due to not closing a number of expected software and mainframe transactions which it moved to the second quarter.
In the second quarter, revenue fell 3% and net income declined 17% over the previous year, and lowered its full-year 2013 GAAP diluted earnings per share guidance from at least $15.53 to $15.08. The greatest areas of revenue growth were Smarter Planet and Cloud, up more than 25% and 70% respectively in the first half.
IBM has produced 6.6% annual revenue growth and 12.1% annual EBITDA growth rates over the past 10 years:
GuruFocus analysis shows that the company has an expanding operating margin, a dividend yield close to a three-year high and a P/E ratio close to a three-year low at 13.26. Negative signs are revenue per share growth slowdown, a P/B ratio close to a 10-year high at 12.79 and the issuing of $7.7 billion in new debt over the past three years though its debt level is acceptable.
Deer & Co. (DE)
Berkshire Hathaway holds 3,978,767 shares of Deer & Co., purchased in the third quarter of 2012 and untouched since. The price that quarter was $78 on average, 5% lower than the current price of $82.26, which is down half a percentage point from a year ago. The holding comprises 0.36% of the portfolio.
Deere is trading at roughly 3.4% above its 52-week low price of $79.50. The stock reached a 52-week high of $95.60 in January.
Deere is a tractor and heavy machinery company that is seeking to capitalize on the macro-trends of global population growth and income growth in developing nations, which are fueling demand for agriculture and infrastructure.
The company has clear-cut goals, outlined in a February 2013 presentation: to expand globally and achieve enterprise net sales of $50 billion at mid-cycle by 2018, a minimum operating margin of 12% at mid-cycle 2014, and asset turns of 2.5 times at mid-cycle by 2018.
For full-year 2012, Deere had revenue of $36.2 billion and an operating margin of 13.1.
In its third-quarter earnings release dated Aug. 14, the company recorded worldwide net sales and revenues up 4% and net income up 26% over the third quarter last year to a record $997 million, after both sales and earnings hit records in the second quarter. The company also raised its full-year income guidance to $3.45 billion from the $3.3 billion projected a quarter earlier.
GuruFocus shows five positive signs for the company: per-share revenue growth, a three-year-high dividend yield, and P/E, P/B and P/S ratio each close to a three-year low. Negative signs include operating margin decline for five years, cash flow divergence from reported earnings, and the issuing of $10.5 billion of debt over the past three years.
Coca-Cola Co. (KO)
Buffett has a 9% stake, or 400 million shares, which comprises 18% of his portfolio and makes him the company’s top shareholder. Buffett appeared at Coke’s annual meeting in April and said he would “never sell a share of Coke stock.”
Coke shares have declined 2% over the past year, to a price of $37.14 on Thursday, which is 4.5% above their 52-week low of $35.58.
Coke has recorded annual revenue growth of 10.9% and annual EBITDA growth of 9.6% rates over the past 10 years, and 13.8% and 9% respectively over the past five years.
Growth diminished in the first quarter of this year, with revenue declining 1% and a 13% decline in earnings per share. The second quarter saw revenues decline 3% and EPS down 3%. Global volume grew 4% and 1% in the first and second quarters, respectively.
GuruFocus analysis shows that the company has shrinking gross and operating margins, and that assets are growth faster than revenue. The company has also seen slowing revenue per share growth in the past 12 months and has issued $14.4 billion of debt over the past three years, though the current debt level is acceptable. Good signs are that its P/E ratio at 20.33 is close to a one-year low, and P/B at 5.28 is close to a one-year low.
See more of Warren Buffett’s stocks, go to his portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of Warren Buffett.
Not a Premium Member of GuruFocus? Try it for free for 7 days here.
