Berkshire-Hathaway an all-weather pick

Invest along with Warren Buffett to hold stakes in a variety of franchise stocks.

By TheStockAdvisors Feb 22, 2012 2:50PM
© Mario Tama/Getty ImagesBy Stephen Leeb, The Complete Investor

The overall economic news is looking up, and market action is strongly suggestive of further gains. But the prospect of turbulence still suggests we put an emphasis on all-weather stocks.

And when we think of all-weather stocks, one of the first that comes to mind is Warren Buffett's Berkshire Hathaway (BRK-B).

Buffett virtually coined the notion that you could translate a so-called franchise into public companies.

Franchises are companies that have control over their markets, or at least are close to exercising a lot of control. And to be good franchises, they have to be in strong and growing markets.

Probably Buffett's two biggest purchases in history, at least among public companies, were Coca-Cola (KO) and Burlington Northern Santa Fe, the latter being a company he took entirely for himself.

He has also invested a huge sum in another company he wholly controls, MidAmerican Energy. Burlington and MidAmerican certainly satisfy the definition of a franchise.

And each is in an industry that's highly leveraged to a burgeoning sector: growing demand in trade and commodities (Burlington) and the growing need for alternative energies (MidAmerican).

In addition to these private holdings, Buffett's biggest earning center is a bevy of insurance companies, including GEICO, General Re and others.

Insurance may be a peculiar business in which to suspect a franchise can exist, but in Buffett's case, it is probably his strongest franchise. 

The edge that he has in insurance is very simply the amount of money that Berkshire Hathaway has. Berkshire's insurance companies maintain capital strength at exceptionally high levels compared to all their competitors.

More money means a greater ability to write additional insurance policies. It means that in a world torn by periodic economic losses from earthquakes, hurricanes, tsunamis, etc., Buffett's insurance assets remain in the catbird's seat.

So when you think uncertainty, think franchises. These are companies, by and large, that have the ability to gain market share when the economic going gets bad (such as with deflation), or can raise prices when the economic going gets good, or can raise prices even more when the economic going gets inflationary.

Investors should not forget to bet a little bit of money on Buffett, probably the greatest investor in the history of capitalism.

Related Articles
2Comments
Feb 22, 2012 3:32PM
avatar
Buy oil stocks. Let the good times roll.
Feb 22, 2012 4:05PM
avatar

its true buy oil stocks let the good times roll

 

Report
Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
Categories
100 character limit
Are you sure you want to delete this comment?

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

116
116 rated 1
284
284 rated 2
461
461 rated 3
671
671 rated 4
628
628 rated 5
618
618 rated 6
615
615 rated 7
495
495 rated 8
347
347 rated 9
115
115 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
DYNDYNEGY Inc10
TAT&T Inc9
VZVERIZON COMMUNICATIONS9
EXCEXELON CORPORATION8
AAPLAPPLE Inc10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.