mlk_man
12-20-2006, 06:59 AM
Time to Buy These Buffett Blue Chips?
Douglas Davenport
Wisdom Fund
http://www.bottomlinesecrets.com/images/drop_caps/blue_w.gif hat looks most promising among Warren Buffett's holdings right now, says Douglas Davenport, isn't anything very complex -- it's just some of the best-known blue-chip stocks in the world. Blue chips in general have remained beaten down since the Wall Street meltdown in 2000. While small-cap stocks, energy, commodities and real estate have captivated investors in recent years, Davenport says, it should now be the mega stocks' turn to shine. There have been only two similar blue-chip buying opportunities in the past three decades -- in the mid 1970s and early 1990s. Looking at the underlying value of the following blue chips that Buffett owns, it's easy to conclude that they are good buys...Coca Cola Co. (KO). This consumer icon traded at nearly $67 per share in 2000 versus about $48 now, but today's price is disconnected to what's been happening internally. During the past six years, earnings per share have jumped from $1.48 to $2.35, a 58% increase. In the same period, sales per share have jumped 24%. In 2000, Coca Cola was paying its investors 68 cents per share in dividends -- it's $1.24 per share today, for an attractive 2.6% yield. The price-to-earnings ratio (P/E) of 22 is about equal to that of the broader market -- a good buy on such a strong, steady company. Recent share price: $48.38.
Wal-Mart Stores Inc. (WMT). This is a great stock that nearly everyone should own, and it's trading at 40% less than it was six years ago. Since 2000, both the sales and earnings per share have jumped by roughly 105%. At the same time, dividends have increased so that the yield -- 1.4% -- remains attractive for a company with continued growth potential. I believe -- as apparently does Buffett -- that Wal-Mart will work through its current public relations problems concerning employee treatment. Recent share price: $46.54.
General Electric Co. (GE). This is another stock poised to please its shareholders because its strong fundamentals are bound to pay off. Since the crash of 2000, earnings per share have soared 122%, and the stock's dividend growth of 145% has been even more impressive. Several of GE's long-cycle businesses -- such as its energy and aviation divisions -- have seen robust orders lately, which should boost revenues and profitability over the next several years. A market-matching P/E and a dividend yield of 2.8% are attractive in such a solid company. Recent share price: $35.11.
Douglas Davenport
Wisdom Fund
http://www.bottomlinesecrets.com/images/drop_caps/blue_w.gif hat looks most promising among Warren Buffett's holdings right now, says Douglas Davenport, isn't anything very complex -- it's just some of the best-known blue-chip stocks in the world. Blue chips in general have remained beaten down since the Wall Street meltdown in 2000. While small-cap stocks, energy, commodities and real estate have captivated investors in recent years, Davenport says, it should now be the mega stocks' turn to shine. There have been only two similar blue-chip buying opportunities in the past three decades -- in the mid 1970s and early 1990s. Looking at the underlying value of the following blue chips that Buffett owns, it's easy to conclude that they are good buys...Coca Cola Co. (KO). This consumer icon traded at nearly $67 per share in 2000 versus about $48 now, but today's price is disconnected to what's been happening internally. During the past six years, earnings per share have jumped from $1.48 to $2.35, a 58% increase. In the same period, sales per share have jumped 24%. In 2000, Coca Cola was paying its investors 68 cents per share in dividends -- it's $1.24 per share today, for an attractive 2.6% yield. The price-to-earnings ratio (P/E) of 22 is about equal to that of the broader market -- a good buy on such a strong, steady company. Recent share price: $48.38.
Wal-Mart Stores Inc. (WMT). This is a great stock that nearly everyone should own, and it's trading at 40% less than it was six years ago. Since 2000, both the sales and earnings per share have jumped by roughly 105%. At the same time, dividends have increased so that the yield -- 1.4% -- remains attractive for a company with continued growth potential. I believe -- as apparently does Buffett -- that Wal-Mart will work through its current public relations problems concerning employee treatment. Recent share price: $46.54.
General Electric Co. (GE). This is another stock poised to please its shareholders because its strong fundamentals are bound to pay off. Since the crash of 2000, earnings per share have soared 122%, and the stock's dividend growth of 145% has been even more impressive. Several of GE's long-cycle businesses -- such as its energy and aviation divisions -- have seen robust orders lately, which should boost revenues and profitability over the next several years. A market-matching P/E and a dividend yield of 2.8% are attractive in such a solid company. Recent share price: $35.11.