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How to choose long-term investments: 6 shares from the portfolio of Warren Buffett



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Warren Buffett is one of the most famous and respected investors in the world. One of the key elements of his approach to investing is called value investing - it is to find undervalued stocks. Today we will talk about how exactly the famous investor chooses such shares, and give some examples of shares of specific companies in the US market.

How to approach the choice of long-term investments


When choosing options for long-term investments, Buffett uses such parameters as:

  • Price / Book (P / B) - the ratio of the market value of shares to the current net asset value (Net Asset), after deducting all expenses for immediate liquidation.
  • Price / Earnings (P / E) - The ratio of the market value of a share to the annual earnings earned per share.
  • Return on equity (ROE) - net profit in comparison with the equity of the organization.
  • dividends - whether the company pays dividends to shareholders.

Buffett is also looking for companies that have the so-called “economic ditches” - barriers that will become a serious obstacle for competitors seeking to oust the company from the market and win its share.

The Investopedia portal has compiled a list of 6 shares that are in Warren Buffett's long-term portfolio.

Nike Inc.


In recent years, the famous manufacturer of sports shoes has gone far beyond this niche and occupies a leading position in the segments of equipment, sports goods, and any other, at least somehow related to sports.

The company makes good money, and according to various sources, it has reserves of $ 4 billion of available funds with almost zero debt burden. Nike is also active in emerging markets, including China. As a result, it is one of the most recognizable brands in the world.

Burlington Northern Santa Fe Corp.


Buffett very much believes in this rail freight operator that has invested $ 34 billion in it. The company owns or leases 310,000 km of railways in the US and Canada. The company transports almost all goods found in the modern economy, from consumer goods to automobiles, oil and coal.

Such companies are experiencing severe economic downturns, but are also particularly promising in the period immediately following the recession. When economic activity increases after the recession, transport companies are the first to win in this situation. Burlington Northern also has a P / E ratio below the market average, and it pays 2% of dividend income.

Conoco phillips


An energy company traded on the NYSE, participating in oil and gas industry projects. ConocoPhillips does everything from drilling to refining and selling end products like gasoline and gas.

The fall in oil prices hit the company's stock price seriously, but in 2009, against the backdrop of a global recession, ConocoPhillips already went through this. Then, stocks soared in a few years from $ 28.4 apiece to more than $ 85. Of the other benefits - the company in recent years has paid dividends at 4%.

Costco


The famous discount store operator in the United States, where customers can purchase everything from food to household goods in large packages, and for this they need to issue a special card. Costco management has been working for many years to maximize profitability and offer customers the best prices.

As a result, the brand is extremely popular in the United States, and Costco fans can zealously prove that the cost of a membership card "pays off" for one trip for groceries. Nevertheless, money for cards sold is the company's net profit.

The coca-cola company


Warren Buffett has owned Coca-Cola for decades and is one of his most successful long-term investments.

The company is growing worldwide. Despite the saturation of the US market, Coca-Cola's revenue is still high. In addition, the company receives the lion's share of revenue abroad, especially in emerging markets. For example, over the past year, profits in India have grown by 25%. In addition to all the advantages, the company pays 3% of dividend income.

Procter & gamble


We can say with confidence that in every home in developed countries (and in many developing) there are Procter & Gamble (PG) products. The portfolio of brands owned by the company includes: Tide, Bounty, Pampers, Head & Shoulders, Gillette, Olay, Crest, Oral-B, Dawn, Downy and Duracell.

The long-term strategy of the company is to be present only in markets where it can receive the largest share or become the second player, but not lower. The presence of leading positions allows the company to regularly raise prices so as not to reduce income, even in a situation of increasing production costs.

Conclusion


Investing on an exchange is always risky. However, having a basket of six stable companies increases the level of diversification and reduces potential losses.

According to Buffett himself, in the short run, the market is a voting machine, and in the long run, it is a scale. Therefore, it is important to choose stocks of companies for investment that have the prerequisites for further growth, and which are very difficult to compete with.

You can buy shares of various American companies from Russia without opening a separate brokerage account with foreign brokers. Using the foreign securities market of the St. Petersburg Exchange, investors can buy 500 liquid shares of leading companies in all sectors of the world economy, including all shares of the S&P 500 index.

To make transactions with such shares you need a brokerage account - you can open it online .

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