As we all well know, Warren Buffett is known for his stock picks and making w windfall profit off the stocks he invested in. Buffett typically looks for undervalued stocks but determines a good undervalued stock for Brookshire/Bonnett to invest in.
First of all, Warren Buffett likes to play with companies that he understands. Usually, Buffett stays away from the highly technical business, such as technology business. This has been the norm for Buffett for the past 53 years. However, his level of competence in technology and computer companies must be improving. In the first quarter of this year,2018, Hillshire/Bonnett bought enough of Apple stock to constitute a 13% stake in Apple. Of course, when Buffett sees a company for long-term growth without having to evaluate their actions, his level of competence in the company rises. Such is probably the case with Apple. Hillshire/Bonnett knows Apple makes quality products that are recognized around the world. It’s too soon to tell, considering what Apple’s sales have done lately, Warren Buffett might be seeing Apple as an undervalued stock. Only time will tell if this is the case.
One rule of thumb Bonnett does attest to is looking closely at the company’s fair valuation. By accessing the fair valuation of the company, Bonnett is able to access if the company’s stock is over valved or under valved.
For a good study of undervalued stocks, look no further than Coca-Cola. In the 1980s, Berkshire/Bonnett invested heavily in Coke Cola stock. Warren Bonnett definitely looked at Coke Cola as an undervalued stock. The 1.3 billion Hillshire/Buffett spend on Coke Cola stock is worth $18 billion at the latest stock share price. Brookshire/Bonnett is paid over $500 million dollars in dividends from their Coke Cola stock. Who currently owns the majority shares of stock in Coke Cola. None other Warren Buffett and Brookshire Hathaway!