Starting this month Buffett-Munger will present the stocks to buy from the list of companies we have written in the past. Three stocks are good buys right now.
In the past we have written about many high quality companies. But their valuation may not be good enough to buy. From this month on, if any of the stocks meet both the quality and valuation requirements, we will add them into the Buffett-Munger Newsletter Holdings portfolio. Three stocks are added into the Buffett-Munger Newsletter Holdings portfolio this month.
In the meantime, we added to our Watch List a company that is easy to understand. The company is from France and has dominated its industry for more than a century. Even so it has a relatively small market share of less than 15% leaving room to grow. Current management has been able to grow the per-share owner earnings at a double-digit rate and appears to be investing heavily for future growth. The company has a rock-solid balance sheet and a reasonable P/E ratio of 14.
Each month the Newsletter presents a company that has generated satisfactory results for decades. The drivers of past success are analyzed in order to determine if they are still relevant and therefore likely to drive future profitable growth. Though these stocks are expected to generate satisfactory results over the long-run, they are not neccessarily cheap.
As of this month, we will start a Buffett-Munger Newsletter Holdings Portfolio. If any of the companies that trade at:
A price to owner earnings multiple of less than 6x
or
A 50% discount to the fair value of the assets, net of debt,
they will be added in the Holdings portfolio. This is a highly-concentrated portfolio of stocks that meet both the qualitative criteria as well as strict quantitative criteria. This portfolio is expected to generate index-beating returns within a reasonable timeframe.
“It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price….when buying companies or common stocks, we look for first-class businesses accompanied by first-class managements.”
- Warren Buffett (Trades, Portfolio) (1989)
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What’s a Buffett-Munger Bargain?
A Buffett-Munger Bargain is a “wonderful company” selling at a “fair price”. To be a wonderful company a stock must pass Warren Buffett (Trades, Portfolio)’s 7-point checklist:
1. Simple Business
2. Favorable Long-Term Prospects
3. Able and Honest Management
4. Consistent Earnings
5. Good Return on Equity
6. Little Debt
7. Very Attractive Price
What’s the Buffett-Munger Bargain Newsletter?
GuruFocus’s Buffett-Munger Bargain Newsletter picks one new “wonderful company” selling at a “fair price” every month. The pick is made using GuruFocus’s Buffett-Munger Screener and Warren Buffett (Trades, Portfolio)’s 7-point checklist. A new issue goes out to subscribers on the third Friday of every month.
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