Tom Russo recently spoke with Bloomberg's radio show "Taking Stock." The guru manages about $10 billion. He likes family-controlled companies because families think long term and don't care as much for quarterly numbers, and also tend to be more conservatively financed. He also likes to invest in companies with high ROE numbers. On the show he touts four stocks, three of which are non U.S. companies.
Nestlé is a Swiss food and beverage company, and currently the largest food company in the world when measured by revenue. According to Russo, the company's branded products are a form of affordable luxuries. When people all over the world start to do better, they move up to the companies products whether it is Kit-Kat (a chocolate bar) or Nespresso coffee. The firm is very dedicated to getting its brands established. It took over three iterations of the Kit-Kat bar to gain traction with Brazil customers, but now it is finally on fire in the country. Néstle trades at a 25x P/E ratio and offers a 3% dividend.
Berkshire Hathaway (BRK.A, Financial) (BRK.B, Financial)
The second largest position of Gardner Russo & Gardner is Berkshire Hathaway. Russo calls the holding company managed by Warren Buffett (Trades, Portfolio) the mother of all reinvestment engines. There is virtually no agency cost with Buffett taking only a small salary and being almost entirely dependent on capital appreciation of his stock investments in Berkshire Hathaway. It trades at 1.34x book value, and Buffett has said he will happily start buying back stock at 1.25x book value. Berkshire has no problems generating the cash to do so.
When asked to name a few more attractive stocks, Russo comes up with Swatch and Richemont. These are trading sharply down and very interesting according to the Russo. Perhaps he has a thing for Switzerland. The Swatch Group SA makes watches like Breguet, Harry Winston, Blancpain, Glashuette Original, Jaquet Droz, Leon Hatot, Omega, Longines, Rado, Union Glashuette, Tissot, Balmain, Certina, Hamilton, Calvin Klein watches + jewelry, Swatch, and Flik Flak. It is controlled by the Hayek family and trades at a P/E of roughly 18x.
Richemont is another Swiss luxury company (the second largest in the world after LVHM) that is sharply down and controlled by the Rupert family. Its brands include Piaget, A. Lange & Soehne, Jaeger-Lecoultre, Vacheron Constantin, Officine Panerai, IWC, Baume & Mercier and Roger Dubuis. It trades at a P/E ratio of 21x.
