In this new series, we will look at the porfolios of “guru” investors and other notable portfolios to determine if they follow the teachings of Benjamin Graham in regards to the Defensive and Enterprising Investors. This week, we review the portfolio of Graham’s greatest student, Warren Buffett. If you have a request of a guru or other portfolio you would like us to look at, please leave a comment below.
According to stockpickr.com, Mr. Buffett’s portfolio consists of about 25 companies. We looked at 21 of those, and you can see the results of our valuations below. Overall, our belief is that Mr. Buffett’s strategy has evolved away from the fundamental quantitative analysis that Benjamin Graham taught and has developed into much more qualitative than we tend to be here at ModernGraham.com. There is much to learn when following Mr. Buffett and we do believe that he does an excellent job at evaluating business management. He is often said to prefer a great company at a good price over a good company at a great price.
We found there to be 9 companies that are currently undervalued, 8 companies overvalued, and 4 fairly valued. As a whole, it seems that Mr. Buffett’s portfolio is fairly valued. However, what we found to be more significant was the fact that 11 of the 21 companies are considered speculative as they do not currently pass the requirements of Benjamin Graham’s defensive or enterprising investors. We believe that is evidence of Mr. Buffett’s focus on a buy-and-hold approach. Some of these companies may have passed the tests when Mr. Buffett purchased them, and now he just continues to hold them and focus on improving management.
- American Express Co (AXP) – Overvalued & Speculative
- Bank of America (BAC) – Overvalued & Speculative
- Burlington Northern Santa Fe Corp (BNI) – Undervalued & Defensive
- Coca-Cola (KO) – Fairly Valued & Speculative
- Comcast Corp (CMCSA) – Undervalued & Speculative
- Conoco Phillips (COP) – Overvalued & Speculative
- Costco Wholesale Corp (COST) – Fairly Valued & Speculative
- Eaton Corp (ETN) – Undervalued & Defensive
- General Electric (GE) – Fairly Valued & Defensive
- Home Depot (HD) – Overvalued & Speculative
- Ingersoll-Rand Company (IR) – Overvalued & Speculative
- Johnson & Johnson (JNJ) – Undervalued & Defensive
- Lowe’s Companies (LOW) – Fairly Valued & Defensive
- Nike Inc (NKE) – Undervalued & Defensive
- Norfolk Southern Corp (NSC) – Undervalued & Defensive
- Proctor & Gamble (PG) – Undervalued & Defensive
- UnitedHealth Group (UNH) – Undervalued & Defensive
- Union Pacific Corp (UNP) – Undervalued & Defensive
- United Parcel Service Inc (UPS) – Overvalued & Speculative
- U.S. Bancorp (USB) – Overvalued & Speculative
- Wells Fargo & Co (WFC) – Overvalued & Speculative