WALL STREET JOURNAL: Warren Buffett: Some of His Stock Picks Look Cheap

Tuesday, December 1, 2009

WALL STREET JOURNAL: Warren Buffett: Some of His Stock Picks Look Cheap

By Matt Phillips

24/06/09

Bloomberg

Can you beat Warren Buffett at his own game?

The Journal�s Brett Arends writes that despite the recent equities rally, some of Buffett�s favorite issues look pretty affordable at the moment:

Mr. Buffett liked oil giant ConocoPhillips (COP) enough to invest $7 billion in the stock through the end of last year, at an average price of $82.55, according to the Berkshire Hathaway annual report. Anyone buying today can get it for about $41.

Mr. Buffett has conceded an �unforced error� in buying this oil stock when oil prices were booming. But that doesn�t mean he has given up on it. In his last comments on the subject a few months ago, he reiterated his belief that demand for energy would remain strong. At current prices ConocoPhillips is about 13 times this year�s forecast earnings, but analysts predict that will drop to a cheap 7 times in 2010. That�s because they believe oil and gas prices will rebound.

He bought Johnson & Johnson at about $62 a share: It�s now about $55, or 12 times likely earnings, yielding 3.5%. He had also invested about $4.3 billion in food company Kraft, at around $33 a share. It�s now around $25, 13 times likely earnings and boosting a hefty 4.7% yield. He had also invested $2.3 billion in US Bancorp at an average price of about $31. Today�s it�s $17. (Mr. Buffett has added to his positions in both Johnson & Johnson and U.S. Bancorp since.)