Warren Buffett says these are the best businesses to own — 3 examples from Berkshire’s portfolio

Warren Buffett says these are the best businesses to own – 3 examples from Berkshire’s portfolio

While we are constantly bombarded with the mambo jumbo of confusing investments, we must never forget that, for the most part, companies exist for one primary reason: to seek capital from investors and return it. For this reason, it makes sense for investors to look for companies with lasting competitive advantage that are able to deliver consistently high returns on investment.

As Warren Buffett, CEO of Berkshire Hathaway once said, “The best company to own is one that can raise a large amount of extra capital at a very high rate of return at a very high price. With that in mind, there are three Berkshire holdings. -Return of the issue.

Moody’s (MCO)

Credit rating leader Moody’s is at the top of our list with a return on consistently invested capital of around 20%.

Shares of Moody’s were incredibly maintained during the height of the epidemic and have risen nearly 220% in the last five years, indicating that it is a recession-resistant business that is worth betting on.

In particular, the position of the company’s well-established leadership in credit ratings, which leads to a large return on capital, should continue to limit the long-term loss of capital.

In addition, Moody’s has generated about $ 2.4 billion in free cash flow over the past twelve months. And in the first three quarters of 2021, the company returned કોને 975 million to shareholders through repurchase of shares and dividends.

As of Q3 2021, Berkshire owns more than 24.6 million shares of Moody’s worth less than $ 8.8 billion. Moody’s has a dividend yield of 0.7%.

Apple (AAPL)

Next, we have consumer technology gorilla Apple, which has a five-year return on 28% invested capital, much higher than competitors like Nokia (-3%) and Sony (12%).

Even in the cutthroat world of consumer hardware, the iPhone maker has been able to generate huge returns due to its loyalty-commanding brand and high switching costs (iOS experience can only be obtained through Apple products).

And as the company continues to enter emerging markets such as India and Mexico, Apple’s long-term growth path remains healthy.

In the most recent quarter, Apple’s revenue rose 29% to $ 83.4 billion. The company has also returned more than $ 24 billion to shareholders.

The stock currently has a dividend yield of only 0.5%, but with a buyback yield of 3%, Apple is giving shareholders more cash than you might think.

No wonder Apple is Berkshire’s largest public holding, with more than 887 million shares in the tech giant worth about $ 125.5 billion.

Procter & Gamble (PG)

Consumer Staples giant Procter & Gamble rounds out the list with a solid five-year average return on invested capital of 13.5%.

Berkshire had 315,400 shares at the end of Q3, valued at about $ 44 million at today’s price. While it’s not a big deal by Berkshire standards, something sets P&G apart: the ability to deliver increasing cash returns to investors through thick and thin.

The company offers a portfolio of trusted brands such as Bounty Paper Towel, Crest Toothpaste, Gillette Razor Blade and Tide Detergent. These are products that the household buys on a regular basis, no matter what the economy is doing.

In April, P&G’s board of directors announced a 10% increase in quarterly payments, marking the company’s 65th consecutive annual dividend increase.

P&G shares currently offer a dividend yield of 2.2%.

Source: Yahoo News

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