WWBB: What Would Buffett Buy? 6 Household Names With Strong Sales
Warren Buffett has long been known for his affinity for recognizable brands and American icons like Coca Cola ( KO). His methodology includes finding companies that are household names, have proven track records, and plenty of repeat business. So it shouldn't come as much of a surprise to see his firm, Berkshire Hathaway Inc. ( BRK.A), in the headlines with 3G Capital Management LLC announcing a proposal to buy Heinz for a cool $23 billion.
Given Buffett's preferences, should we have seen this coming? With this hindsight in mind we looked for stocks we think Buffett would consider going forward. We used the Kapitall Super Screener to sort through stocks in the S&P 500 with strong historical performance and consumer-friendly names. Strong performance doesn't necessarily mean "high growth" or even "high yield." Companies in the list below have steadily increased sales over that last 5 years and have slowly paid out dividends to loyal shareholders. Consequently, the stocks below aren't exactly penny stocks; you get what you pay for. And that's a steady stream of future cash. These companies are here to stay and generate returns for years to come.
The potential for these mature companies is reflected in the large number of positive analyst ratings. Strong buy ratings on these stocks are an extra reassurance that these stocks can meet their sales growth targets.
Use this list as a starting point to determine not if but when to invest in these solid stocks.
1. Capital One Financial Corp. (COF): Market cap at $31.46B, most recent closing price at $54.03. COF has a P/E ratio of 8.19 and a dividend yield of 0.37%. Sales have grown 11.35% over the last 5 years.
Capital One has built the bulk of its business around extending to credit to consumers in the form of credit cars and auto loans. From a financial standpoint, this is a stable and highly liquid business. Capital One's clever marketing has aligned with its strategy, making it one of the most recognizable brands around.
2. CVS Caremark Corporation (CVS): Market cap at $62.93B, most recent closing price at $51.12. CVS has a P/E ratio of 16.82 and a dividend yield of 1.76%. Sales have grown 10.11% over the last 5 years.
CVS has always made repeat purchases a priority with their Extra Care cards. Walgreens has rolled out a similar loyalty program recently but CVS has been ahead of the curve.
3. Chevron Corporation (CVX): Market cap at $225.B, most recent closing price at $114.96. CVX has a P/E ratio of 8.63 and a dividend yield of 3.13%. Sales have grown 1.83% over the last 5 years.
Demand for energy won't be going away anytime soon. Chevron has been a leader in oil exploration around the world. In the US, it's second only to Exxon. New areas of production will support the business in the next few years. Chevron has been able to stabilize its business by avoiding risky growth (like expanding to areas in the Middle East).