Berkshire Hathaway published its third-quarter results earlier this month, and some big numbers stood out. For one, CEO Warren Buffett and the analysis and management team at the investment conglomerate bought back $7.6 billion of the company’s own stock. The report also indicated that the company was a net seller of other stocks, and it closed the quarter with a whopping $149 billion in cash reserves.
Buffett and Berkshire are keeping their powder dry and indicating that they’re finding it more difficult to find great values in the market. Read on to see why a panel of Motley Fool contributors thinks Walmart (NYSE:WMT), United Parcel Service (NYSE:UPS), and Amazon (NASDAQ:AMZN) would be strong portfolio additions for the Oracle of Omaha.
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Never dismiss an industry’s undisputed leader
James Brumley (Walmart): Smart investors spend a lot of time making and updating investment plans, and rightfully so. However, often obscured by diversification pie charts, opening the right sort of accounts, projecting your portfolio’s value, and automating your dollar-cost averaging work is the simple fact that picking good long-term stocks is still the most important piece of this puzzle. Berkshire’s performance is proof that just buying and holding quality names — and then leaving them alone — works.
On that note, Walmart is a top name Berkshire doesn’t currently hold but arguably should.
Surprised? That’s understandable. The world’s biggest retailer has most of the hallmarks of a Buffett-approved pick. Namely, it’s a leader in a business that’s easy to understand, and it can remain so indefinitely thanks to reliable cash flow.
That’s not to suggest the company is indestructible. It can bump into headwinds, with some of them linked to its sheer size. Empty store shelves were an all too common occurrence for Walmart back in 2013, for example, as out-of-store executives lost touch with what was happening on the front lines. But the cool part about being the biggest and best-funded name in a particular industry is that you can buy your way out of problems. That’s what the retailer is doing now, deploying $14 billion worth of investments in automation and supply chain efficiencies that will help it better compete with Amazon.
I’m surprised Buffett hasn’t steered Berkshire back into Walmart after closing out a long-term position in the retailer back in 2018. It’s certainly proved its mettle in the meantime.
UPS has a simple yet powerful investment thesis
Daniel Foelber (United Parcel Service): Berkshire Hathaway technically owns shares of package delivery giant UPS. But the stake makes up less than a hundredth of a percent of its portfolio. UPS is Buffett’s smallest stock holding, but there are many reasons it deserves to be one of his largest.
If there are three things Buffett likes, it’s dividends, entrenched moats that protect a business from competition, and steady long-term…
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