Billionaire Warren Buffett is the most renowned value investor in contemporary times. Many believe he has the Midas Touch. He makes money in every stock investment. But does he buy shares of companies selling below their intrinsic values only?
The CEO of Berkshire Hathaway personally picks the stocks for his conglomerate. Value investing is the strategy and trademark of Mr. Buffett. He has the penchant for correlating stock prices with a companyâs real value. Because he targets undervalued stocks, heâs also regarded as the ultimate bargain hunter.
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Buffett owns dividend-paying stocks
When Buffett picks stocks, it doesnât mean heâs out to buy cheap stocks. Price or value is relative. The objective is to look for companies whose prices are not consistent with their long-term potentials. He would then evaluate further by comparing the price of companies in the same sector.
Once it is determined that the current market value is lower than its real worth, a buy decision is firmed up. The legendary investor knows how to identify stocks that present an opportunity for greater profit. When it comes to dividends, Buffettâs publicly listed conglomerate doesnât pay dividends.
Despite this self-imposed policy, the investment guru is not against dividend stocks. One interesting scoop is that 68% of his conglomerateâs stock holdings are dividend-paying stocks. Since he is a value investor by heart, I can assume he bought these high-quality investments at reasonable prices.
Winning stocks
Buffettâs stock portfolio matters to investors. They follow his every move as well as the stocks he buys. Restaurant Brands International (TSX: QSR)(NYSE: QSR) has risen in popularity because it was disclosed that Buffett has a substantial stake in this consumer discretionary stock. Obviously, he sees the profitability of RBIâs iconic brands — Tim Hortons, Burger King, and Popeyes.
Canadaâs famous quick-service restaurant chain pays a 3% dividend to stockholders. The chain is also expanding its outlets by 54% in the next decade. Expect Buffett to hold on this stock because of its long-term growth potential.
Berkshire Hathaway also bought about 10.75 million shares of Suncor Energy (TSX: SU)(NYSE: SU) last December. The stock is up +13.63% year to date and is projected to increase by 45.4% in the next 12 months. With the 3.65% dividend this energy stock is paying, Buffett would earn quite a windfall.
Enghouse Systems (TSX: ENGH) is not among the names in Buffettâs stock portfolio. But if Iâm the billionaire investor, I will keep a close watch over this tech stock. Buffett had no confidence for tech stocks but had a change of heart. In hindsight, he would have purchased Apple early on.
The Canadian tech firmâs net income has been growing for the last three years. The stock pays 1.34% dividend but has yet to reach its potential. Enghouse Systems is also pretty aggressive pursuing growth through acquisitions. Using the companyâs profits to acquire other companies is one of Buffettâs philosophies.
Although Buffettâs firm pays zero dividends, heâs not totally against dividends. He advises companies to have clear, consistent, and rationale dividend policies. Otherwise, they would drive away investors.
