6 Stocks Berkshire Hathaway Should Buy With Its DirecTV Profits

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6 Stocks Berkshire Hathaway Should Buy With Its DirecTV Profits

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The stocks Warren Buffett should consider using his DirecTV profits to buy

Transcript of 6 Stocks Berkshire Hathaway Should Buy With Its DirecTV Profits

Page 1: 6 Stocks Berkshire Hathaway Should Buy With Its DirecTV Profits

6 Stocks Berkshire Hathaway Should Buy With Its DirecTV Profits

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Ford Motor Co. (NYSE: F)

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Ford Motor Co. (NYSE: F)

• P/E Ratio: 9.9• Dividend: 3.2%• 3-year projected

annual earnings growth rate: 12.9%

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Why Berkshire Should Buy Ford• Ford has historically been the most stable U.S.

automaker, and was by far the most financially sound during the crisis years.

• The company has excellent brand recognition and has done an excellent job of bringing its focus back to its core operations by selling the Jaguar and Land Rover brands

• Despite trading for less than 10 times earnings, Ford is expected to grow impressively over the next few years

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Apple (NASDAQ: AAPL)

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Apple (NASDAQ: AAPL)

• P/E Ratio: 14.4• Dividend: 2.2%• 3-year projected

annual earnings growth rate: 9.1%

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Why Berkshire Should Buy Apple • Apple has about $160 billion in available cash, and a very ambitious plan

to return cash to shareholders• Buffett has publicly praised Apple’s management, saying “they’ve done a

pretty good job of running the company.”• Excluding cash, Apple trades for just 10 times earnings• Apple is simply an excellent value at the current share price with annual

growth of nearly 10% expected over the next several years• In fact, some analysts who cover Apple are projecting growth rates as high as

17%• If Apple releases another game-changing product like the iPhone, iPad,

and iPod were, the upside potential is huge• Downside risk is limited by the stockpile of cash, as well as incredibly strong

iPhone and iPod sales

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Transocean (NYSE: RIG)

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Transocean (NYSE: RIG)

• P/E Ratio: 9.7• Dividend: 5.4%• 3-year projected

annual earnings growth rate: N/A

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Why Berkshire Should Buy Transocean

• Although it is expecting earnings to contract slightly, Transocean still trades for an excellent value

• The company is planning to spin off some of its European operations into a separate entity, which activist investor Carl Icahn believes will increase Transocean’s value significantly

• At 5.4%, Transocean pays an excellent dividend, which is very sustainable since it represents less than half of the company’s profits

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TD Bank N.A. (NYSE: TD)

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TD Bank N.A. (NYSE: TD)

• P/E Ratio: 14.4• Dividend: 3.6%• 3-year projected

annual earnings growth rate: 8.1%

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Why Berkshire Should Buy TD Bank• Warren Buffett loves companies with durable

competitive advantages, and TD Bank definitely has one.

• Known as “America’s Most Convenient Bank”, because of its very convenient hours• Many branches are open 7 days a week• Drive through banking is available until midnight in

many locations• TD’s branches close only 7 days every year!

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Gap Inc. (NYSE: GPS)

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Gap Inc. (NYSE: GPS)

• P/E Ratio: 15.1• Dividend: 2.2%• 3-year projected

annual earnings growth rate: 10.9%

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Why Berkshire Should Buy Gap • Gap’s share price is actually lower than it was a year ago,

mainly due to weakness in the sector, even though their business is thriving

• In fact, Gap is projected to have double-digit earnings growth in the next few years

• The company is doing an excellent job of growing online sales, as well as expanding into international markets, especially Asia

• Gap’s dividend has more than doubled since 2010, but still represents a payout ratio of only 27% of the company’s earnings

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AT&T (NYSE: T)

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AT&T (NYSE: T)

• P/E Ratio: 10.6• Dividend: 5.2%• 3-year projected

annual earnings growth rate: 5%

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Why Berkshire Should Buy AT&T • The most logical choice for Berkshire may be to simply keep the

AT&T shares it will receive as part of the DirecTV deal• According to Standard & Poor’s, the deal will produce about

$1.6 billion in cost synergies for AT&T, as well as increase its presence in Latin America and grow its television customer base.

• If Berkshire’s management did indeed believe in DirecTV long-term, the company should get even stronger as part of the AT&T family.

• At 5.2%, AT&T pays an excellent dividend, which it has an excellent history of increasing

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Photo Credits• Ford Mondeo: wikimedia/Thesupermat• Gap: wikimedia/Dorsetdude• TD Bank: wikimedia/Mbisanz• All other photos are in the public domain