Value Investing: 5 Most Profitable Stock in the Warren Buffet Portfolio


We found 5 profitable stocks among Warren Buffett's holdings - are they right for value investors?

High profile management changes are in the news today. Apple (AAPL) is rallying on the back of its new director of retail, Angela Ahrendts, the former CEO of Burberry (OTC:BURBY). This comes amid swirling speculation about the future of Warren Buffett's Berkshire Hathaway (BRK/B). 

Management turnover has hindered the company's expansion and investors are starting to grow wary about a finding successor for their 83-year-old CEO, the eminent Warren Buffett.

For now, however, Buffett continues in his role as the proverbial king of value investing, making leadership changes and publicly criticizing the "extreme idiocy" of Washington on TV. 

And, as todays huge price changes in both Apple and Burberry illustrate, leadership can have a huge impact on a stock's share price. Apple has just nudged over the $500 mark (as of 2pm EST), whereas Burberry is trading down around 6%. 

It can be hard for value investors to make money if a stock doesn't have much of an up-swing. That's why value investors usually buy during periods of economic uncertainty, as Buffett did during the financial crisis. Those investments netted him over $10 billion so far, as The Wall Street Journal reported this weekend. 

Investing ideas: the Warren Buffett portfolio

Taking a page out of Warren Buffett's playbook, we decided to screen the 40 biggest publicly traded holdings that are listed in Berkshire Hathaway's portfolio for profitability. Are any stocks surpassing even Buffett's astute expectations? 

To do that we looked at gross, operating, and pre-tax margins over the trailing twelve months (TTM), which together give a picture of how efficiently a company has been building its profits over the course of the last year. Companies beating their industry average may be poised for future growth.

And as a value investor, Buffett considers other factors besides leadership and margins, such a as low price-to-equity ratio (P/E). So for comparison, we included the P/E ratio for the five stocks left on our list.

Click on the interactive chart below to see analyst ratings over time. 

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Do you follow the investing strategies of Warren Buffett? Use the list below as a starting point for your own analysis. 


1. Mastercard Incorporated (MA, Earnings, Analysts, Financials): Provides transaction processing and related services to customers principally in support of their credit, deposit access, electronic cash and automated teller machine payment card programs, and travelers' cheque programs. Market cap at $87.69B, most recent closing price at $724.69.P/E Ratio: 28.49. TTM gross margin at 58.11% vs. industry average at 50.62%. TTM operating margin at 55.% vs. industry average at 30.76%. TTM pretax margin at 54.96% vs. industry average at 30.66%.


2. Moody's Corp. (MCO, Earnings, Analysts, Financials): Provides credit ratings and related research, data, and analytical tools; risk management software; and quantitative credit risk measures, credit portfolio management solutions, and training services in the United States, Europe, the Middle East, and Africa. Market cap at $16.27B, most recent closing price at $73.20. P/E Ratio: 21.44. TTM gross margin at 71.79% vs. industry average at 55.6%. TTM operating margin at 39.99% vs. industry average at 34.16%. TTM pretax margin at 37.7% vs. industry average at 19.55%.


3. M&T Bank Corporation (MTB, Earnings, Analysts, Financials): Operates as the holding company for M&T Bank and M&T Bank, National Association that provide commercial and retail banking services to individuals, corporations and other businesses, and institutions. Market cap at $14.52B, most recent closing price at $112.34. P/E Ratio: 12.97. TTM gross margin at 89.68% vs. industry average at 75.08%. TTM operating margin at 52.66% vs. industry average at 45.12%. TTM pretax margin at 38.2% vs. industry average at 25.14%.


4. Torchmark Corp. (TMK, Earnings, Analysts, Financials): Provides individual life and supplemental health insurance products, and annuities to middle income households. Market cap at $6.79B, most recent closing price at $73.66. P/E Ratio: 12.99. TTM gross margin at 23.28% vs. industry average at 16.46%. TTM operating margin at 23.28% vs. industry average at 13.64%. TTM pretax margin at 20.85% vs. industry average at 11.95%.


5. U.S. Bancorp (USB, Earnings, Analysts, Financials): Provides various banking and financial services in the United States. Market cap at $69.67B, most recent closing price at $37.80. P/E Ratio: 12.69. TTM gross margin at 83.69% vs. industry average at 75.08%. TTM operating margin at 51.99% vs. industry average at 45.12%. TTM pretax margin at 36.2% vs. industry average at 25.14%.


(List compiled by James Dennin. Analyst ratings sourced from Zacks Investment Research. Updated information on Berkshire Hathaway holdings sourced from CNBC here. All other data sourced from Finviz.)

Analyze These Ideas: Getting Started

Read descriptions for all companies mentioned Access a performance overview for all stocks in the list Compare analyst ratings for the companies mentioned Compare analyst ratings to annual returns for stocks mentioned Real-Time Opinion: Scan the latest tweets about these companies (feed will open in a new window)

Dig Deeper: Access Company Snapshots, Charts, Filings

Mastercard Incorporated (MA, Chart, Download SEC Filings) Moody's Corp. (MCO, Chart, Download SEC Filings) M&T Bank Corporation (MTB, Chart, Download SEC Filings) Torchmark Corp. (TMK, Chart, Download SEC Filings) U.S. Bancorp (USB, Chart, Download SEC Filings)



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