Buffet Likes Bud and Wal-Mart

Warren Buffet is the kind of investor hero Wall Street needs. As America’s second richest man, and the richest whose company doesn’t make crap, lesser mortals can benefit greatly by swimming with the shark. Berkshire Hathaway, the company that he’s made into an investment powerhouse, has posted its holdings with the SEC, and it makes for some interesting reading. Most notably, the Sage of Omaha is a believer in Budweiser and in Wal-Mart.

While it is not part of the SEC filings to explain why Berkshire Hathaway holds what it does, there is no denying that the stakes are significant. Berkshire Hathaway disclosed that it held 44.7 million shares of Anheuser-Busch stock valued at about $1.9 billion and 19.9 million shares of Wal-Mart stock valued at about $874 million as of September 30. Of course, Berkshire is worth loads more than that, with its Class A shares trading at about $84,000 each, and the Class B shares a mere $2,900.

Mr. Buffet’s approach to investing doesn’t have any hype or mathematical models with lots of Greek letters. Instead, he buys stock in companies that do things and make things that he understands. The company must be undervalued, that is, if the stock price already reflects a buoyant future, he won’t buy. And he holds stock, no day-trading.

So, his Anheuser-Busch holding, which is about 5.8% of the company’s outstanding stock, means he believes that Bud is going to remain the King of Beers. He also believes that the rest of the company’s brands and products have more winners than losers. And above all, he believes that the market has yet to realize this.

As for Wal-Mart, there has been a lot of ink lately about the company’s troubles with immigrant workers, healthcare (or the lack thereof), and the negative effects that the arrival of a big Wal-Mart has in communities that have relied on more traditional retailers. Mr. Buffet’s 19.9 million shares of Wal-Mart stock represents less than half a percent of Wal-Mart’s outstanding stock. So he doesn’t quite believe in it as much as he does in Anheuser-Busch. But at the same time, he’s put about $875 million into it. He must think that the company is better off long term than the recent press might have one believe.


© Copyright 2005 by The Kensington Review, J. Myhre, Editor. No part of this publication may be reproduced without written consent.
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