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Stocks B / Berkshire Hathaway

URL:  http://boards.fool.com/thanks-for-that-explanation-it-brings-to-mind-30542067.aspx

Subject:  Re: Berkshire buys Heinz Date:  2/14/2013  10:59 AM
Author:  LONGREITS Number:  198572 of 214649

Thanks for that explanation.

It brings to mind Buffett's March 2011 CNBC interview, which I believe is one of the most interesting ever.

Specifically, he talked about buying businesses for the long-term and buying, theoretically, Coke, Walmart, and Wells Fargo, and why he could not buy any of them:

BUFFETT: And I like those businesses, and I like the prices at which they sell, and I like the managements. But if I had my choice, I would rather buy a big business if it's all our criterion. But we have 60-plus billion in common stocks, and those are pieces of businesses that I like. And most of those businesses— now, Wells Fargo we couldn't buy. We can't buy a bank. You know, Coca-Cola isn't going to sell out to us, Wal-Mart isn't going to sell out to us. So we would be very happy owning 100 percent of those businesses at the prices at which they sell, or otherwise I wouldn't buy the stock.

http://www.cnbc.com/id/41872903

That interview was March 2, 2011. Buffett also stated he liked the companies at their current prices and would not buy them at a 20% premium.

Coke opened at $64.59 on March 2, 2011. In the intervening (nearly) two years, TTM earnings have gone from 1.75 to 2.00, or an increase of 14% + (very rough approximation, per Value Line, whose figures are not updated for 2012 trailing). The stock is up to $74.34 split adjusted, or approximately 15%. So the increase in the price of the stock has been commensurate with the increase in its earnings power. Therefore, I'd like to believe Buffett would buy Coke, in its entirety, today at $74.34 if he could. This is about 19x trailing earnings, which many think is expensive. However, this conclusion is consistent with what many think about Heinz. I would bet he is buying Heinz for the same reasons, and the reasons you state, sustainable long-term (real) earnings power.
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