(GuruFocus, June 17, 2009) Are you caught running out of ideas of stocks to invest in, now that the stocks seem to be rebounding? Perhaps Warren Buffettcan help you.
Last Summer, following Warren Buffett’s advice of investing in companies that have proven and predictable earning, GuruFocus published its research on effects of Business Predictability and Valuation on stock returns in the past 10 years in this, this, this and this article.
Essentially, we reverse engineered Warren Buffett-Charlie Munger’s stock-picking methodology and published on GuruFocus.com.
These companies owned by Warren Buffett have also earned the highest ranking in their business predictability: UnitedHealth Group Inc.(UNH, Financial),The Home Depot Inc. (HD, Financial), Lowe's Companies Inc. (LOW, Financial), WalMart Stores Inc. (WMT, Financial), Iron Mountain Inc. (IRM, Financial).
Here is a brief review of each company and Berkshire Hathaway’s ownership history in the company:
1.UnitedHealth Group Inc. (UNH)
UnitedHealth Group Inc. offers health care coverage and related services to help people achieve improved health and well-being through all stages of life. UnitedHealth Group Inc. has a market cap of $27.97 billion; its shares were traded at around $23.51 with a P/E ratio of 7.9 and P/S ratio of 0.3. The dividend yield of UnitedHealth Group Inc. stocks is 0.1%. UnitedHealth Group Inc. had an annual average earning growth of 30.4% over the past 10 years. GuruFocus rated UnitedHealth Group Inc. the business predictability rank of 5-star.
Warren Buffett owned 1.0 million shares of UNH back in 4Q06. He upped his stake in 2Q07 to 4.8 million shares, and 3Q07 to 6.0 million shares. He was seen selling UNH in 1Q09, reducing his holding from 6.3 million shares to 4.5 million shares, despite a steep decline in the share price as well.
2. The Home Depot Inc. (HD)
Home Depot is the one of world's largest home improvement retailer. The Home Depot Inc. has a market cap of $40.45 billion; its shares were traded at around $23.85 with a P/E ratio of 14 and P/S ratio of 0.6. The dividend yield of The Home Depot Inc. stocks is 3.8%. The Home Depot Inc. had an annual average earning growth of 19.5% over the past 10 years. GuruFocus rated The Home Depot Inc. the business predictability rank of 5-star.
Warren Buffett initiated a small stake (945,000 shares) in HD in 2Q05, but upped quickly to 5.0 million shares in 3Q05. He reduced his holdings slightly to 4.2 million shares in 1Q06 and reduced further in 3Q08 to 3.7 million shares.
3. Lowe's Companies Inc. (LOW)
Lowe's Companies Inc. is Homedepot’s dead serious competitor. Lowe’s or HD, Berkshire Hathaway owns it all. Lowe's Companies Inc. has a market cap of $28.98 billion; its shares were traded at around $19.66 with a P/E ratio of 14 and P/S ratio of 0.6. The dividend yield of Lowe's Companies Inc. stocks is 1.7%. Lowe's Companies Inc. had an annual average earning growth of 21.4% over the past 10 years. GuruFocus rated Lowe's Companies Inc. the business predictability rank of 5-star.
Warren Buffett bought for Berkshire Hathaway 780,000 shares of LOW in 2Q05, he upped to 7.0 million shares in 3Q06 and stayed there until 3Q08, when he sold 0.5 million shares.
4. WalMart Stores Inc. (WMT)
Wal-Mart Stores Inc. is the world's largest retailer. WalMart Stores Inc. has a market cap of $189.62 billion; its shares were traded at around $48.46 with a P/E ratio of 14.1 and P/S ratio of 0.5. The dividend yield of WalMart Stores Inc. stocks is 2.3%. WalMart Stores Inc. had an annual average earning growth of 13.3% over the past 10 years. GuruFocus rated WalMart Stores Inc. the business predictability rank of 5-star.
Warren Buffett owns 20 million shares of WMT since 4Q05.
5. Iron Mountain Inc. (IRM)
Iron Mountain Incorporated is one of the world's largest records and information management services company. Iron Mountain Inc. has a market cap of $5.54 billion; its shares were traded at around $27.38 with a P/E ratio of 34.2 and P/S ratio of 1.8. Iron Mountain Inc. had an annual average earning growth of 16.7% over the past 10 years. GuruFocus rated Iron Mountain Inc. the business predictability rank of 5-star.
Berkshire Hathaway owned as much as 27 million shares of IRM in 4Q02 but it has been selling shares since. At the end of 1Q09, it held 3.4 million shares, a stake it kept steady for the past 5 quarters.
Afterthoughts
Earning a 5-star in business predictability is no small trait. There are almost 10,000 stocks traded in the US stock markets, in our ranking that described in this article, only less than 80 (less than 0.8%)company qualifies for the very exclusive club. Yet, among the 41 stocks that Berkshire Hathaway owns, five (over 12%) of them are 5-star company. In that sense, our Business Predictability ranking system improved the chance of finding a Berkshire Hathaway stock by more than 150 times. Do you think it is a coincidence?
GuruFocus has started publishing a news letter based on our Buffett-Munger stock screener. Starting from June 2009, each month, we screens, research and recommend on two stocks. The first issue is available through this link.
Last Summer, following Warren Buffett’s advice of investing in companies that have proven and predictable earning, GuruFocus published its research on effects of Business Predictability and Valuation on stock returns in the past 10 years in this, this, this and this article.
Essentially, we reverse engineered Warren Buffett-Charlie Munger’s stock-picking methodology and published on GuruFocus.com.
These companies owned by Warren Buffett have also earned the highest ranking in their business predictability: UnitedHealth Group Inc.(UNH, Financial),The Home Depot Inc. (HD, Financial), Lowe's Companies Inc. (LOW, Financial), WalMart Stores Inc. (WMT, Financial), Iron Mountain Inc. (IRM, Financial).
Here is a brief review of each company and Berkshire Hathaway’s ownership history in the company:
1.UnitedHealth Group Inc. (UNH)
UnitedHealth Group Inc. offers health care coverage and related services to help people achieve improved health and well-being through all stages of life. UnitedHealth Group Inc. has a market cap of $27.97 billion; its shares were traded at around $23.51 with a P/E ratio of 7.9 and P/S ratio of 0.3. The dividend yield of UnitedHealth Group Inc. stocks is 0.1%. UnitedHealth Group Inc. had an annual average earning growth of 30.4% over the past 10 years. GuruFocus rated UnitedHealth Group Inc. the business predictability rank of 5-star.
Warren Buffett owned 1.0 million shares of UNH back in 4Q06. He upped his stake in 2Q07 to 4.8 million shares, and 3Q07 to 6.0 million shares. He was seen selling UNH in 1Q09, reducing his holding from 6.3 million shares to 4.5 million shares, despite a steep decline in the share price as well.
2. The Home Depot Inc. (HD)
Home Depot is the one of world's largest home improvement retailer. The Home Depot Inc. has a market cap of $40.45 billion; its shares were traded at around $23.85 with a P/E ratio of 14 and P/S ratio of 0.6. The dividend yield of The Home Depot Inc. stocks is 3.8%. The Home Depot Inc. had an annual average earning growth of 19.5% over the past 10 years. GuruFocus rated The Home Depot Inc. the business predictability rank of 5-star.
Warren Buffett initiated a small stake (945,000 shares) in HD in 2Q05, but upped quickly to 5.0 million shares in 3Q05. He reduced his holdings slightly to 4.2 million shares in 1Q06 and reduced further in 3Q08 to 3.7 million shares.
3. Lowe's Companies Inc. (LOW)
Lowe's Companies Inc. is Homedepot’s dead serious competitor. Lowe’s or HD, Berkshire Hathaway owns it all. Lowe's Companies Inc. has a market cap of $28.98 billion; its shares were traded at around $19.66 with a P/E ratio of 14 and P/S ratio of 0.6. The dividend yield of Lowe's Companies Inc. stocks is 1.7%. Lowe's Companies Inc. had an annual average earning growth of 21.4% over the past 10 years. GuruFocus rated Lowe's Companies Inc. the business predictability rank of 5-star.
Warren Buffett bought for Berkshire Hathaway 780,000 shares of LOW in 2Q05, he upped to 7.0 million shares in 3Q06 and stayed there until 3Q08, when he sold 0.5 million shares.
4. WalMart Stores Inc. (WMT)
Wal-Mart Stores Inc. is the world's largest retailer. WalMart Stores Inc. has a market cap of $189.62 billion; its shares were traded at around $48.46 with a P/E ratio of 14.1 and P/S ratio of 0.5. The dividend yield of WalMart Stores Inc. stocks is 2.3%. WalMart Stores Inc. had an annual average earning growth of 13.3% over the past 10 years. GuruFocus rated WalMart Stores Inc. the business predictability rank of 5-star.
Warren Buffett owns 20 million shares of WMT since 4Q05.
5. Iron Mountain Inc. (IRM)
Iron Mountain Incorporated is one of the world's largest records and information management services company. Iron Mountain Inc. has a market cap of $5.54 billion; its shares were traded at around $27.38 with a P/E ratio of 34.2 and P/S ratio of 1.8. Iron Mountain Inc. had an annual average earning growth of 16.7% over the past 10 years. GuruFocus rated Iron Mountain Inc. the business predictability rank of 5-star.
Berkshire Hathaway owned as much as 27 million shares of IRM in 4Q02 but it has been selling shares since. At the end of 1Q09, it held 3.4 million shares, a stake it kept steady for the past 5 quarters.
Afterthoughts
Earning a 5-star in business predictability is no small trait. There are almost 10,000 stocks traded in the US stock markets, in our ranking that described in this article, only less than 80 (less than 0.8%)company qualifies for the very exclusive club. Yet, among the 41 stocks that Berkshire Hathaway owns, five (over 12%) of them are 5-star company. In that sense, our Business Predictability ranking system improved the chance of finding a Berkshire Hathaway stock by more than 150 times. Do you think it is a coincidence?
GuruFocus has started publishing a news letter based on our Buffett-Munger stock screener. Starting from June 2009, each month, we screens, research and recommend on two stocks. The first issue is available through this link.
