hi I'm Jimmy in this video I'm gonna walk through some of Warren Buffett's
main holdings to see how much of a value investor Warren Buffett really is now
I'm sure we all know that Buffett is big on holding stocks for a long time
so I was curious if he really bought stocks that were out of favor or as
Warren Buffett himself puts it well you want to be greedy when others are
fearful you want to be fearful when others are greedy it's that simple, okay so what
I did is I looked at some of Buffett's biggest holdings and then tried to
identify when they first invested in that particular company then I went back
to that time period and to see if we could calculate what the price to
earnings ratio was back then that way we could try to see what Buffett saw at the
time and then we do the same thing for the stock market for the same time
period that way we had something to compare it to
okay so let's jump right in so right now one of Buffett's largest holdings is
Apple now Buffett has raged on and on about how
much he likes the Apple brand and how loyal the Apple customers are so this is
a five-year chart of Apple stock and Berkshire Hathaway got involved in this
during 2016 right in that time period now Buffett has come out recently and
said that the average price for Apple stock is somewhere near 142 so clearly
they've added some shares since the early days when they first started
buying the company but if we would have focused just on the early days when they
first started buying it well Berkshire when they paid for Apple
stock they paid about 12 times earnings per shift so they had a p/e about 12x
the S&P 500 at that same time had a p/e of about 19 X so clearly there's some
value there now if we'd have fast forward to today well apples currently
trading at a price to earnings ratio of about 19 X which is almost at the S&P
500's current level of about 20x so it makes sense that this would be one
of Buffett's largest positions since she since he got such a good value early on
and at that time what I'm guessing what he saw was a solid business with a great
brand and was trading at a discount to his calculation of intrinsic value and
it's likely that at some point that would be valued near the average of in
this case we'll call the market of about 20
now as curious what a good value really was so assuming we stick with price to
earnings for a minute I mean what if the S&P 500 is currently overvalued then the
20x doesn't make a lot of sense so I pulled down the average PE for the SP
500 going all the way back to the early part of 1970 and that number came out to
be about 17 X and I was curious what a really cheap stock looked like so I went
back to the bottom of the Great Recession and at the bottom the S&P 500
had an average p/e ratio of about 11x now it didn't stay in there for too long
the a month before that the p/e was at about 14 X at a month after that was
trading at 15 X so it didn't stay there terribly long but now we have an idea of
some averages some lows and the current level okay moving on next up we have
coca-cola now coca-cola Buffett started buying coca-cola during 1988 and at that
time he had said that he expected to hold coca-cola forever we could see that
once again Buffett's p/e ratio was lower than that of the stock market at that
time they paid about 14 times earnings and the S&P 500 was trading at about 15
times earnings now it's probably worth noting that this big purchase of Coke
came shortly after the stock market crash of 1987 so that seems to be a
theme throughout a lot of Buffett's biggest buys okay up next we have
Buffett's purchase of American Express now American Express is an interesting
one because Buffett first bought into American Express back in back during the
1960s when he had Buffett partnerships and back then that was right after they
had a big scandal called the salad oil scandal so I'm guessing he got it for a
good deal now his currents taking American Express started in 1994 and at
that time he paid about 10 times earnings so he they had 10x and the
sp500 had an average of 21 X so clearly this was a pretty good deal and it makes
sense that he's still holding this investment today okay up next we have
Kraft Heinz now clearly we could see that back in 2013 when Buffett first
bought Heinz back then it was called HJ Heinz
well clearly the stock looked to be overvalued but Buffett didn't actually
buy the common shares back then he bought preferred shares and they paid
him 9 percent on an annual basis so yes the common was overvalued relative to
the market at that time but that doesn't account for the dividends at the
preferred shares a penny now the story turned worse for Buffett
because a few years later he him in another group pushed for the merger with
Kraft and in 2015 they could they finished the merger and the company
became Kraft Heinz well since then Buffett has admitted that they overpaid
for Kraft although he says that the deal that he originally made with Heinz
wasn't a bad deal with the 9% prefers and since then they've converted their
preferred shares into common shares and they ended up having to take a write
down because once again they overpaid for crash okay up next we have Moody's
now here we could see that at that time the S&P 500 was trading at a pretty high
level compared to pretty much all of our markers and the what they paid for
Moody's was a bit too high compared to the market as well now it may be no
surprise to us that this is one of the positions that Buffett has trimmed down
over the years I'm guessing because they probably didn't get the return that they
were looking on their initial investment which looks like they may have overpaid
for okay now we're moving along to Delta Airlines which was trading at that time
and a huge discount to the market and this just recently happened on the it
was at the tail end of 2016 now when we switch over to the chart for Delta well
we can see that they were buying right in this time period so it would make
sense that I'm guessing this is something that Buffett was watching for
a while and then they jumped in and started buying as the entire industry
pulled back if nothing else Buffett seems to be fairly disciplined and
during that time period Buffett bought a few other airlines as well so he must
have liked the entire industry and he saw the entire industry pull back okay
up next we have another one from the same industry Southwest so once again it
looked like a good deal relative to the market and he bought
this one a few months after he started buying Delta okay up next Berkshire
Hathaway by General Motors they bought them back
in 2012 and at that time they paid about six times earnings and the market was
trading at about fourteen times earnings so once again it seems that Buffett has
been fairly consistent with paying less than the overall market he seems to be
pretty patient when waiting for a good deal then we slide down to the next one
and that's visa now I'm actually a big fan of Visa and MasterCard and we might
as well expose the next one since Buffett went out and bought both now we
started both of these positions back in 2011 MasterCard in early 2011 and Visa
towards the end of 2011 Buffett credits his sort of second-in-command Todd combs
for finding both of these investments and he says today that he regrets not
buying more at that time because if he believes that this is a great long-term
business and that this is the where much of the Internet and online transactions
and transactions in general are going to go too so perhaps that explains why
relative to the market he's slightly overpaid for these so in that scenario I
suppose it would make sense to overpay slightly if we believe that the long
term business is fundamentally strong okay now I'm going to expose the rest of
these all at once since the rest of them are all banks and as we could see each
one of them were bought below where the stock market was currently trading with
her PU is currently trading Wells Fargo as an example was bought back in 1991
after the banking sector in general had gone through some issues in 1990 Buffett
said that they had done a bunch of foolish loans and I'm surprised by that
because I always thought that Wells Fargo was one of those companies that
you could trust to make solid business decisions with the highest level of
ethics in all of business you know it's nice to finally have a bank we can trust
okay I'm just playing either way Buffett seems to love banks and he tends to buy
them when they are trading at a discount to the market in general and when they
tend to be beat up the best example of this purchase came with Goldman Sachs so
during the Great Recession Goldman Sachs and pretty much every other funny
Oshin was in a lot of trouble and they were doing whatever they could to get
some cash they needed money and getting the backing of the world's greatest
investor was likely going to go a long way insuring up their company well
because they needed the cash a lot of companies willing to cut very favorable
deals with Buffett so in 2008 Buffett invested five billion dollars in Goldman
for preferred shares and they gave him a ten percent annual dividend and they
also allowed him they gave him warrants which allowed him
to buy the shares of the stock at $115 per share there are similar options
those options expired or those warrants expired in 2013 they had to buy they had
to buy the shares by October of 2013 and before the warrants expired well clearly
Buffett exercised his warrants and after a few years of collecting about five
hundred million dollars a year from Goldman dividends well he gets to buy
the shares at about $115 per share and at that time they were trading at one
hundred and sixty dollars a share so we netted a fairly huge profit fairly
quickly so clearly this is one of those deals that only Buffett could have
pulled off but I do find it interesting how much activity he seems to have
whenever the market tanks or even if in industry tanks and for me this is the
real takeaway from this entire analysis yes Buffett seems very committed to
value but he's also consistently buying companies when they appear to be a good
deal he seems to wait generally for a good deal but I also think it makes
sense for us to look at companies in an industry that seems to be distressed
especially if it's distressed temporarily and if our holding period is
long enough I would expect that most of us could do quite well assuming that we
do our research and we understand the business and the industry well enough I
would expect from most of us would have the ability to beat the stock market but
what do you think do you have the same takeaway from this analysis as I do you
have any takeaway besides by companies that look to be cheap please let me know
what you think in the comments below if you haven't done so yet hit the
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for sticking with me at the end to the end of the video I'll see in the next
video thanks