2 More Stocks Warren Buffett Should Consider

If you’re looking to emulate the Oracle of Omaha, you should consider these names too.

| More on:
The Motley Fool

A previous article looked at a couple of Canadian companies that Warren Buffett could consider buying. And while it is practically impossible to predict his next move, especially since he has so many options, it doesn’t hurt to speculate. After all, if we think Mr. Buffett may want to take a look at a particular company, then that company’s shares may be a good investment for the rest of us too.

So with that in mind, below are two more companies that Mr. Buffett should consider. Each of them is very similar to an investment he made in the past. And each of them are compelling options for our portfolios too.

1. CAE

To understand why Mr. Buffett may be interested in CAE (TSX: CAE)(NYSE: CAE), one has to go all the way back to 1996, when Berkshire Hathaway bought FlightSafety International. FlightSafety makes its money from flight simulation services, which is very capital intensive – at the time, simulators could cost up to $19 million to build. But the economics were still attractive enough for Mr. Buffett.

CAE is the market leader in flight simulation, and thus FlightSafety’s largest competitor. But there’s an important distinction to be made between the two companies. FlightSafety makes all of its money off of services, which requires building an expensive simulator, then charging customers to use it over the simulator’s life. CAE makes half its money off of selling simulators outright. And in this scenario, much of the purchase price is paid well in advance by the customer. This makes the economics far superior to FlightSafety’s.

There is one reason why Mr. Buffett would never buy CAE: antitrust concerns. CAE and FlightSafety together would dominate certain markets in the United States, so Mr. Buffett will probably have to let this one go. But that does not stop the rest of us from trying to emulate the Oracle of Omaha by buying this stock.

2. Aimia

To provide context for Aimia Inc (TSX: AIM), one has to go all the way back to 1970, when Berkshire Hathaway first started investing in Blue Chip Stamps. Blue Chip was a loyalty program in which customers collected stamps from partner retailers, pasted them into books, and eventually redeemed the stamps at special “redemption stores”.

Blue Chip was great for Mr. Buffett because the company received cash upfront (stores had to pay for the stamps when issuing them to customers), but only had to incur the related expenses later, when customers redeemed their stamp collection. This allowed Mr. Buffett to invest the money in the interim.

Blue Chip is no longer around, having lost out to more high-tech alternatives. But the modern-day equivalent is Aimia, best-known for the Aeroplan program. Like Blue Chip, Aimia collects cash upfront and pays the expenses later. Interestingly, Aimia only invests the money in safe securities such as bonds. But if Mr. Buffett were to buy Aimia, he could invest that money however he wants.

Aimia also isn’t overly expensive; the shares are cheaper now than they were in 2007, when Aimia had no international operations, and made much less money than it does today.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Benjamin Sinclair holds a position in the shares of Aimia Inc. The Motley Fool owns shares of Berkshire Hathaway.

More on Investing

Business man on stock market financial trade indicator background.
Tech Stocks

This Growth Stock Is Down 26%: Buy, Sell, or Hold?

While many growth stocks took to the sky after the December 2023 earnings, this one growth stock fell 26%. Should…

Read more »

Man data analyze
Dividend Stocks

1 Magnificent S&P 500 Dividend Stock Down 39% to Buy and Hold Forever

NextEra Energy is among the largest utility companies in the world, which has delivered inflation-beating returns in the last 20…

Read more »

stock research, analyze data
Dividend Stocks

2 Magnificent Stocks to Buy That Are Near 52-Week Lows

Do you want to add some magnificent stocks to your portfolio? Here are two discounted options that you will regret…

Read more »

STACKED COINS DEPICTING MONEY GROWTH
Dividend Stocks

Don’t Miss This Once-in-a-Decade Chance to Lock in a 9% Dividend Yield

Is your passive income portfolio earning a decent dividend yield? Here is an opportunity to boost your portfolio with a…

Read more »

four people hold happy emoji masks
Metals and Mining Stocks

Got $200? 2 Lithium Stocks to Buy and Hold Forever

Lithium stocks may not be in the headlines like chip stocks, but they have just as much growth potential over…

Read more »

Dividend Stocks

If You Invested $10,000 in BCE Stock in 2010, This Is How Much You Would Have Today

There are many ways to earn money from the same stock. Here are three ways to invest $10,000 in BCE…

Read more »

Senior Couple Walking With Pet Bulldog In Countryside
Investing

3 TSX Stocks That Could Help Make You Rich by Retirement

TSX stocks like goeasy have the potential to outperform the broader equity markets by a wide margin and deliver solid…

Read more »

Happy family father of mother and child daughter launch a kite on nature at sunset
Dividend Stocks

3 Things You Need to Know if You Buy Gildan Stock Today

Gildan stock (TSX:GIL) rose after a dividend increase, but there is still a lot of turmoil behind the scenes that…

Read more »