Even if Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B) did not have an absurd amount of cash on books, there is always speculation and guesses around that of Warren Buffett can add to the portfolio. We do not have any inside information about what Buffett will do next, but we like to talk about promotions that we think will be great for the Berkshire portfolio – or for investors who like to find investments like Buffett.
So, we asked the three Motley Fool collaborators to each cover the promotions they would expect, just down to Warren Buffett's alley. This is why they chose Waste Management (NYSE: WM) White Mountains Insurance Group (NYSE: WTM) and Alphabet (NASDAQ): GOOG  (NASDAQ: GOOGL) .
How Buffett Can not Loved This Rubbish Investment?
Tyler Crow (Waste Management): Imagine that Waste Management has met Buffett's Office more than once. The waste giant would be at home in the Berkshire portfolio. The company has the perfect combination of a broad-based, scalable, and rule-based economy, as well as a management team inclined to reward shareholders with dividends and payouts.
Waste treatment is by no means a sexual industry, but it is part of an appeal to investors. This is a business with enormous downstream capital costs, which also tends to face a large number of regulatory obstacles. This gives the recognized players a huge scale as a huge benefit from waste management. The company was able to pass on the growth of prices to customers for many years, because society always produces waste that needs to be properly disposed of, and there are no options.
The company reported record earnings and operating cash flow. 2018 Due to increased volumes of waste collection and rising prices. She was able to return shareholders $ 1.8 billion in cash in the form of higher dividends and payments. That the one-two strike of the shareholders returns turned out to be a dull stock on the outperformer market since the end of the century
If there is anything that will keep Buffett away from waste management, that's the price. Stock is not traded at an unreasonable price – its cost-earnings ratio is 22, but Buffett said that he would like to buy the whole company, which means that buying a waste management requires a big premium. what he trades today. If this stock was to go on sale, however, this would be a great approach to the Berkshire Hathaway portfolio.
Slowly and steadily wins the race
White Mountains Insurance: One thing is completely clear: Warren Buffett absolutely loves bank and insurance reserves. Companies in the banking and insurance industries can usually earn money on autopilot. That's why I believe that Buffett would be ready to dig under the surface in order to capture the share of property insurance and accident and reinsurance insurance in the White Mountain.
As with most insurers, the goals of the White Mountain include increasing the insurance and reinsurance business. annually. In 2018, despite the difficult end of the year in terms of financial investment, the operations of HG Global / BAM, which provide municipal bonds insurance, reached record highs in aggregate bonus and payout resources. BAM's warranty activity was particularly strong in large institutions in 2018, with the company pointing out that the secondary market activity increased by 21%.
What distinguishes the White Mountains as an insurer is the acquisition and investment activities of the company. Even with a fiscal and conservative management team that intends to increase the book value of the company, the White Mountains are not afraid to take large investments or directly buy other companies to supplement insurance, reinsurance and insurance technology platforms. Inorganic growth is a quick way to raise and lower the upper limit.
He also has a significant investment portfolio, about two thirds of which are usually invested in fixed income assets, with about a third in passive exchange – trading funds. An environment with higher interest rates plays a role directly in the poor portfolio of fixed income of the White Mountains, while a long-term stock market valuation can increase the cost of a more aggressive share of the White Hills investment portfolios.
the successive redemption of a company of its joint stock reduces its outstanding volume of shares and increases its book value. During the last decade, the number of White Mountain insurance shares fell by two thirds, while the book value of shares increased threefold.
Buffett must buy some of these technological giants
Brian Stoffel (Alphabet): It is well known that Buffett does not like to invest in technology companies. He believes that they are difficult to understand and, more importantly, argues that it is difficult to measure the moat surrounding the technological players. When it comes to Alphabet, a parent company to Google, however, I think it's matured for Buffett's investment.
Berkshire Hathaway Vice President Charlie Munger has already gone on record that Google has one of – if not – – the widest gauge in the business world today. It is easy to understand why he thinks that:
- The brand of the company is enormous. Forbes estimates it as the second most valuable asset in the world, and the company owns two of the most visited sites on Earth: Google.com and YouTube.
- Moderately high switching costs are becoming more widespread. Last year Google Drive received 1 billion users. When people save data to Google Drive and synchronize their Android devices, they will most likely stick to it in the long run – switching is a pain!
- First of all, the alphabet is probably the least costly product in the world. It has seven other products that you can use on Google Drive with over 1 billion users: Search, Maps, Gmail, Play Store, Android, Chrome and YouTube. All the data that he collects is used to sell targeted ads – a scale that only Facebook can expect.
Some may argue that the alphabet, which is traded more than 30 times, lags behind the free cash flow, is too expensive. But I would have to resist another Buffet maxim: it is better to buy a big company at a fair price than a fair company at a very good price. Alphabet is one of the largest companies in the world, and prices today are more than fair.
Susanne Frey, executive director of Alphabet, is a member of the board of directors of The Motley Fool. Randy Zuckerberg, former director of market development and the press secretary of Facebook and the sister of CEO Mark Zuckerberg, is a member of the board of directors of The Motley Fool. Brian Stoffel owns shares of Alphabet (Promotions A), Alphabet (Promotions C) and Facebook. Sean Williams has no position in any of these stocks. Tyler Crow owns Berkshire Hathaway shares (stock B) and waste management. Motley Fool owns shares and recommends alphabets (promotions), alphabets (C shares), Berkshire Hathaway (Promotions B) and Facebook.