In 1962, a young portfolio manager named Warren Buffett bought a textile mill company in Massachusetts named Berkshire Hathaway. Instead of using the cash generated from the business to expand or pay out a dividend, Buffett started buying stocks with the cash.
The rest, as they say, is history, as the Oracle of Omaha has stacked gains on top of gains to create one of the world's largest conglomerates, which has come to own hundreds of businesses thanks to its chairman's once-in-a-generation ability to pick winning stocks. In his 47th year as head of Berkshire Hathaway (BRK.A, news, msgs), Buffett now manages a portfolio of stocks worth more than $50 billion.
Today we'll look at six stocks that Buffett currently owns. We'll discuss why these stocks grabbed his attention and why they should be on your radar, too. This "baby Buffett" portfolio could be a great first step to get you back into the market if you've been sitting lately.
Or, if you're a more seasoned investor, consider one or more of these stocks as a welcome addition to your portfolio.
The Buffett philosophy
Warren Buffett is a proponent of value investing, which focuses on stocks that are undervalued compared with their intrinsic value. Financial metrics such as price-book ratio, price-earnings ratio, return on equity and dividend yield carry the most weight on Buffett's scales. In addition, he seeks out companies that have what he calls "economic moats" -- high barriers to entry for a competitor that might wish to invade the market and erode profit margins.More from MSN Money and Investopedia
Here are six of his most promising stock picks for the next decade and beyond:
1. Nike
The Nike (NKE, news, msgs) name is synonymous with high-performance shoes, but the company has expanded far beyond footwear. It's now a leader in apparel, sporting goods and just about anything else for the athletically inclined. Nike is No. 1 in just about every market it participates in, leading to high profit margins.The company also has a strong balance sheet, with nearly $4 billion in cash and barely any debt to speak of. This company is also making big inroads in China and other developing economies, with one of the strongest and most recognizable brands in the world.
Video: Buffett's big Goldman bet pays off
2. Burlington Northern Santa Fe
This freight-railroad operator owns or leases nearly 50,000 route miles of track in the United States and Canada. Burlington Northern Santa Fe (BNI, news, msgs) transports nearly everything that makes an economy go, from consumer goods and autos to lumber, petroleum and coal.Railroad operators like BNI are considered "early cycle" beneficiaries of a strengthening economy. When activity picks up after a recession, transport companies tend to be among the first to see higher orders, sales and earnings growth. Burlington Northern also sports a below-market average P/E ratio and a handy 2% dividend yield.
3. ConocoPhillips
This integrated energy company participates in all parts of the oil and gas industry, doing everything from drilling to refining to end sales of refined products such as gasoline, natural gas and petrochemicals for industrial use.ConocoPhillips (COP, news, msgs) shares were more than halved in the past 18 months as the global recession punished energy prices, and refining margins fell to their lowest levels in more than a decade.
But a rebound in crude oil and some prudent decisions by management to scale back spending have helped to put a floor under the stock. It trades for barely 12 times earnings while paying a nearly 4% dividend yield.
(Learn more about how to invest in this industry in Investopedia's "Oil and gas industry primer.")
Continued: No shame in coattail investing
Rate this Article
High
