1. How to use GuruFocus - Tutorials
  2. What Is in the GuruFocus Premium Membership?
  3. A DIY Guide on How to Invest Using Guru Strategies
James Li
James Li
Articles (1390)  | Author's Website |

4 Buffett-Munger Stocks Ahead of Buffett's 90th Birthday

Good companies with PEG ratios less than 1

In light of Berkshire Hathaway Inc. (NYSE:BRK.A)(NYSE:BRK.B) CEO Warren Buffett (Trades, Portfolio) celebrating his 90th birthday on Sunday, four stocks that have a price-earnings-to-growth ratio less than 1 are AmerisourceBergen Corp. (NYSE:ABC), Group 1 Automotive Inc. (NYSE:GPI), Asbury Automotive Group Inc. (NYSE:ABG) and Sleep Number Corp. (NASDAQ:SNBR) according to the Buffett-Munger Screener, one of several value screens offered to GuruFocus Premium members.

Buffett's favorite market indicator tops 180% ahead of his 90th birthday

Buffett's favorite market indicator, which captures the ratio of the Wilshire 5000 full-cap market index to the U.S. gross domestic product, stood near 184% on Friday, close to an all-time high. While the Wilshire 5000 climbed to over $35.6 trillion, gross domestic product of approximately $19.41 trillion reflects an annual rate decline of 31.7% for the second quarter according to a second estimate released by the Bureau of Economic Analysis. The new estimate is slightly better than the annual rate decline of 32.9% according to advanced estimates issued in July.

4ebfe0131c6b9aa1839e10aa89990e10.png

The Dow Jones Industrial Average closed at 28,653.87, up 161.60 points from Thursday's close of 28,492.27. Apple Inc. (NASDAQ:AAPL), the top holding of Berkshire, closed at $499.23 on its final trading day prior to its four-for-one stock split, down slightly from the previous close of $500.04.

47eb682be96d809da70c49e815993a3a.png

Buffett-Munger Screen seeks good companies at fair prices

Buffett and co-manager Charlie Munger (Trades, Portfolio) said that they seek four key criteria when seeking investments: understandable businesses, favorable long-term prospects, honest and competent management and attractive share prices. To qualify for the Buffett-Munger Screener, a company must have high business predictability, strong competitive advantages, no meaningful debt when growing businesses and low valuations. For the valuation criterion, GuruFocus considers the price-earnings-to-growth ratio, which captures the ratio of price-earnings to the five-year earnings growth rate.

f610a2e7bf287715dc1ef64b05ec4790.png

Legendary investor Peter Lynch, who managed the Fidelity Magellan Fund during the 1980s, believes that the fair price-earnings ratio for growth companies equals its growth rate, i.e., the price-earnings-to-growth ratio is 1. A PEG ratio less than 1 means that the price-earnings ratio is less than the growth rate, suggesting undervaluation. GuruFocus requires a PEG ratio less than 2 for the Buffett-Munger Screener.

AmerisourceBergen

Shares of AmerisourceBergen closed at $97.55, yielding a PEG ratio of approximately 0.65. The stock's PEG valuation outperforms 90.32% of global competitors.

150cc5841b000ebdfdd3dd7b4ba7b55d.png

AmerisourceBergen engages in wholesale sourcing and distribution of specialty, brand-name and generic pharmaceutical products to hospitals, medical clinics and retail pharmacies. GuruFocus ranks the Chesterbrook, Pennsylvania-based company's profitability 8 out of 10 on several positive investing signs, which include expanding operating margins, a four-star business predictability rank, a high Piotroski F-score of 8 and a return on equity that outperforms 96.92% of global medical distribution competitors.

84f08a49a9fa7aef23945fbbbd5b3d53.png

Gurus with large holdings in AmerisourceBergen include Pioneer Investments (Trades, Portfolio), Larry Robbins (Trades, Portfolio)' Glenview Capital Management and Seth Klarman (Trades, Portfolio)'s Baupost Group.

d3a80088691ed065f615b3cb7f004f77.png

Group 1 Automotive

Shares of Group 1 closed at $91.82, yielding a PEG ratio of approximately 0.78. Group 1's PEG valuation outperforms 77.97% of global competitors.

fd1acbf0004bfe57b20356c08f5963d9.png

The Houston-based company owns and operates over 185 automotive dealerships, 242 franchises and 49 collision service centers in the U.S., the U.K. and Brazil. GuruFocus ranks the company's profitability and valuation 8 out of 10 on several positive investing signs, which include a five-star business predictability rank, a price-earnings ratio that outperforms 75.81% of global competitors and a price-sales ratio that outperforms 89.44% of global companies specializing in vehicles and parts.

431ab5a50ecf93e8417aa4214551fa36.png

Asbury Automotive

Shares of Asbury Automotive closed at $108, yielding a PEG ratio of approximately 0.91. The company's PEG valuation outperforms over 75% of global competitors.

8770cf855ede832ad3937e447d9e0374.png

GuruFocus ranks the Duluth, Georgia-based auto dealership company's profitability 8 out of 10 on several positive investing signs, which include expanding operating margins, a five-star business predictability rank and a return on equity that outperforms 95.84% of global competitors.

6f76e905e4425c3e180f7ae65377c266.png

Sleep Number

Shares of Sleep Number closed at $49.18, yielding a PEG ratio of approximately 0.94. Sleep Number's PEG valuation outperforms 69.63% of global competitors.

34b356d01dd5073c30226144e2746278.png

GuruFocus ranks the Minneapolis-based sleep solutions company's profitability 9 out of 10 on several positive investing signs, which include a 4.5-star business predictability rank, a return on assets that outperforms 81.47% of global competitors and three-year revenue and earnings growth rates that outperform over 85% of global furnishings, fixtures and appliances companies.

531180d59fdee36799ef20ed3765aaca.png

Disclosure: Long Apple.

Read more here:

Not a Premium Member of GuruFocus? Sign up for a free 7-day trial here.

About the author:

James Li
I am an editorial researcher at GuruFocus. I have a Master's in Finance from SMU, and I enjoy writing reports on financial trends and investor portfolios. Follow me on Twitter at @JamesLiGuru!

Visit James Li's Website


Rating: 0.0/5 (0 votes)

Comments

Please leave your comment:



Performances of the stocks mentioned by James Li


User Generated Screeners


pjmason14Momentum
pascal.van.garsseHigh FCF-M2
kosalmmuse6
kosalmmuseBest one1
DBrizanall 2019Feb26
kosalmmuseBest one
DBrizanall 2019Feb25
kosalmmuseNice
kosalmmusehan
MsDale*52-Week Low
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)