Warren Buffett has some strict requirements when it comes to investing in companies. Cheapness is one major factor that he looks for, but he also has to find high-quality companies that are very affordable. So it obviously makes sense that his portfolio is going to contain many low P/E companies. I’d like to fill you in on the lowest now which are General Motors Company (GM), Conoco Phillips (COP), Gannett Co. Inc. (GCI) and General Dynamics Corp. (GD).
A low P/E (price to earnings) ratio is a strong indicator which tells you when a company’s earnings have grown or stayed flat, but the price hasn’t for whatever reason and should eventually end up going up later.
Warren Buffett opened up his position in General Motors Company during the first quarter of 2012. He bought 10 million shares at an average price of $25 per share. The company’s P/E ratio is holding at 5.3, but this is after its P/E declined for a year and a half straight.
Conoco Phillips is a position that Buffett has been slowly whittling down since 2008. In 2008 he had over 83 million shares, but in the third quarter of 2012, he now has 29,100,937 shares. Conoco Phillips P/E ratio is currently at a three-year low of 6. This is a significant drop since it was in the high teens during 2010.
Warren Buffett also bought shares of Gannett Co. Inc. prior to the year 2007, but it is only a tiny portion of his overall portfolio at 0.035%. The company’s P/E ratio is 6.5, and this is basically in its middle range over the last few years.
Gannett earnings dropped 22.7% over the prior year in the first-quarter of 2012. It stated that the results were impacted because of advertising softness as well as strategic investing on the part of the company. Every segment of the company was profitable, and it’s digital segments and broadcasting segments rose 7% and 8% respectively. The digital revenue even grew by a large 13%, and this shows just how important it is for newspapers to push their digital platforms.
Berkshire Hathaway and Warren buffet owned 3,877,122 shares of General Dynamics Corp. at the end of the first quarter of 2012. This is actually a new holding that they opened up in the third quarter of 2011. And General Dynamics has a P/E of 8.6, which has been declining over the last few years. Their P/E ratio was in the high teens prior to the recession taking place.