Three High Quality Dividend Growth Stocks On My Radar

“Price is what you pay. Value is what you get.”

- Quote by Warren Buffett.

Words have never rang truer. Warren Buffett is one of my personal heroes, and I can think of few quotes that more embody his thesis on investing than the one I’ve included above.

I’m including that quote because it’s easy to get caught up in the excitement of the stock market. When stocks are going up seemingly every single month and it appears impossible to pick a bad company, one needs to be even more persistent on focusing on the intrinsic value of the companies that are being investigated for a possible investment of long-term capital. Time heals all wounds, but overpaying even for a very high quality company can lead to sub-par total returns for a long period of time. I believe in paying fair value for a high quality company, but if I can get high quality for a price below fair value I’m a very happy investor.

This being said, I’m going to include a list of three stocks that could allow an investor to buy equity in high quality companies for what I feel are reasonably attractive prices relative to their intrinsic value and the broader market as a whole.

General Electric Company (GE)

GE is the first stock I ever purchased, way back in early 2010. I promptly sold it when I couldn’t think of a reason why I bought it in the first place. That sale, and the research I started shortly thereafter, led to the valued oriented dividend growth investing strategy I’m currently using. I’m actually a bit anxious to bring the journey full circle and make an investment in GE the 36th company I own equity in. We’ll see what happens. I currently find GE attractively valued here at just under $24 per share. I recently used a Dividend Discount Model to value shares, and using a 7% growth rate and a 10% discount rate I got a Fair Value on shares at $27 per share, which lines up nicely with what Mornigstar currently values the shares at. A current yield of 3.21% is attractive and GE has been aggressively increasing the dividend since they had to cut it back in 2009 during the depths of the Great Recession. GE has raised the dividend five times since the cut and Jeffrey Immelt, the CEO of GE, has publicly stated that shareholder returns, and the growth of the dividend, is a priority. They are reducing the size of GE Capital, the division that led to a lot of their financial problems during the recession due to overexposure of subprime mortgages and a freeze of capital markets, and using dividends (like the recent $6.5 billion dividend to parent GE) from this division to reinvest back into core assets and return value to shareholders. GE is also actively selling off non-core assets, like the recent sale of NBC Universal and its headquarters. The P/E ratio of 16.55 is very moderate and the payout ratio of 53% leaves room for future dividend growth, especially anticipating earnings growth from some of the structural changes and focus on infrastructure moving forward. GE is currently near the top of my watch list.

Exxon Mobil Corporation (XOM)

Not much to say here. Exxon Mobil is the second largest company in the world, often trading places for the #1 spot with Apple Inc. (AAPL) depending on the day and their respective stock prices. Exxon has been raising the dividend payout for 31 consecutive years, which is a fantastic feat for a company that operates in such a cyclical industry like energy exploration, production and refinement. The price of XOM shares today at just over $91 per share is pretty close to Fair Value, which I calculate at right about $90 per share. Fact is, XOM is one of the highest quality companies in the entire world and paying fair price for a company of this kind of quality is something I’m generally okay with. The entry yield at 2.76% leaves a little to be desired, but this is actually on the high side of its historical yield level. The payout ratio is currently at just over 25%, so obviously there is plenty of room for growth of the dividend. The balance sheet is flawless and XOM has a proven track record of success. The P/E ratio of 9.31 is fair for this company, however I’d be looking to buy shares if they can dip down to the $87-88 level. I’m also interested in some of the other oil supermajors like Chevron Corporation (CVX) and Royal Dutch Shell PLC (RDS.B) at current prices.

General Mills, Inc. (GIS)

General Mills is one of those boring investments that just continues to deliver returns to shareholders. A fantastic company with a superb product lineup. They operate in more than 100 countries and they have more than 100 leading U.S. brands. Brands like Cheerios, Pillsbury, Bisquick, Chex Mix, Wheaties, Trix, Haagen-Dazs, Betty Crocker and Fiber One are just a sample of some of the great brands under the General Mills roof. Shares are currently priced with a P/E ratio of 18 and offer an entry yield of 3.1%. I think GIS is attractively valued here, and one could make an argument that shares are worth up to $53. General Mills has raised the dividend for the last 10 years and has been paying out dividends for an impressive 114 years. The payout ratio stands at 55.8%, which is a tad on the high side but certainly sustainable. I was actually interested in purchasing an equity stake with General Mills at the same time the deal involving the purchase of H.J. Heinz Company (HNZ) by Berkshire Hathaway Inc. (BRK.B) and 3G Capital was announced. GIS was one of many food-related companies that spiked significantly after the deal was announced, and the shares just kind of ran away from me. This is an unfortunate side effect of being a cautious investor like myself. I don’t react as fast as the market and prefer to take my time and do the due diligence necessary to really immerse myself into a company. I was looking at the most recent annual report for GIS at the same time shares were skyrocketing. I was hoping for a quick return to planet Earth, but it was not to be. A pullback in GIS shares would have me intensely interested as I love the brand names and rich dividend history this company offers.

Price is what you pay. Value is what you get. I think all three companies I have listed offer a reasonable price-to-value relationship for today’s elevated market.

I have enough capital to make one more purchase and I have been intently watching shares in all three of the above companies closely over the last week or so hoping for a good entry point. We’ll see what the next couple weeks offer. I’ve been active already this month, with the purchase of shares in Digital Realty Trust, Inc. (DLR) and the addition of an equity stake in Oneok, Inc. (OKE). For now I’ll continue to sit on the sidelines with what little capital I have left and hope for a small correction to offer a small window of an opportunity to a modest value investor like myself.

How about you? Like any of the above three companies?

Full Disclosure: Long CVX, DLR, OKE

Photo Credit: digitalart/FreeDigitalPhotos.net

Comments

  1. says

    I would like to have added GE back when it was trading in the 18-19 range. I’ve watched Exxon for a couple of years as well.

    I don’t have much cash available to pick up stocks these days, other than a couple of thousand left to fund the Roth, but I certainly think these stocks would be a great addition to any portfolio. I’m also continuing to watch the REIT sector, BCE, and LNCO.

    Cheers

    • says

      The Stoic,

      Thanks for stopping by! Hope all is well with the new real estate venture. :)

      I would have loved to have kept GE when I first bought it at $15 per share way back in early 2010. Of course, I had no thesis for buying it. It was a company I had heard of and the stock seemed cheap. That’s all I knew. I sold GE and everything else on pure principle. I didn’t know what I was doing and I didn’t want to buy anything else until I was confident that I had changed that.

      Later, when I become comfortable and familiar with the DGI strategy I had found that GE didn’t really fit in with that strategy and I moved on. Of course, at that time it was a different company. It has since scaled GE Capital down quite a bit and sold off NBC Universal. I like the changes.

      Best of luck with everything!

      Take care.

  2. Anonymous says

    I LOVE the watchlist blog. I hope it opens alot of conversation about others and their watchlist.
    I love GE. I bought in at 21 in January (the 21 number was luck I just wanted in). I was watching it then one night randomly saw the Knight Rider racing the train GE commercial and realized enough crunching he numbers, sometimes you need to go with the gut. I would buy more but an looking to expand my portfolio of 10. GIS is definitely on my watch list and isn’t “boring” good when you are dividend investing!!!
    -Jersey Jerry

    • says

      Jersey Jerry,

      Glad you liked the post! I try to do posts like these at least once a month so we can all have an open conversation and share ideas. It benefits us all. :)

      Great job buying GE at $21. I think you got a nice price there. If it were to fall anywhere near that again I’d be all over it.

      As far as GIS being boring, that was definitely tounge-in-cheek! :) If owning equity in a high quality company and building wealth through the compounding magic of dividend growth and reinvesting dividends is boring, then I am the most boring guy you’ll ever meet!

      Best wishes.

  3. says

    I have both GE and GIS, no XOM. GIS actually had a buyable pullback recently. I bought 150 shares at 47.38 on the 10th and the stock has been going straight back up ever since. I really like GIS and definitely see it being a core holding of mine for a long time to come. I would like to significantly increase my stake in GE though as it’s my smallest holding at the moment

    • says

      also I wanted to add about XOM..it worries me how big they are. I love investing in large cap companies that are the best at what they do, but I do think there’s comes a point where law of large numbers comes in to play. When looking at a CVX or a XOM I’d much rather go with CVX just because of the fact they are half as big, and in my mind have more to grow to catch up to XOM. I realize I’m likely thinking of it wrong but it makes me extremely nervous to invest in the largest company in the world…main concern how can they keep getting bigger and bigger?

    • says

      Took2Summit,

      Great buy on GIS! It is high on my watch list. The brands that company owns is astounding. I simply love it. Good for you. I’m sure you’ll be a very happy shareholder for many years to come. I hope to join you soon. :)

      I don’t think you need to worry about XOM and size. I can think of no other industry where size and scale helps as much as when you’re talking about energy exploration and production, refinement and transport. I mean this is very capital intensive. I think bigger is better. CVX has actually performed quite similarly to XOM over the last 5 years, last I checked. I think both are fine companies, and I would love to own equal shares of both. My main reasoning for diversifying between the oil supermajors is to mitigate some of the risk of black swan events like the Deepwater Horizon spill that BP had.

      Best regards!

  4. says

    I am also a big fan of GE, and include it within my portfolio. The market value of shares I own in GE have risen by about 25% since I first bought in back in 2010 I believe, and just like you mentioned the dividend they pay has been growing like a weed. Great holding, excellent brand strength!

    • says

      Dividend Tactics,

      Great job on the GE purchase. It wasn’t even on my watch list until recently because of all the troubles they had during the Great Recession. Reducing GE Capital’s balance sheet and focusing on infrastructure has me interested again. I think GE could be a great industrial company again. We’ll see how it all plays out.

      Best regards.

  5. Steve says

    I like GIS but I’m not sure about GE. In the past they have been a great, well diversified company. Since their disastrous GE Capital arm severely weakened them during the Great Recession, I’ve been skittish about them.

    Also, my brother in law has worked in one of their plants that makes windmill generators. I have never been impressed with the leadership of that plant. They treat their workers very poorly and cut costs by hiring temps so they don’t have to pay benefits. When Obama was reelected in 2012, they announced that they would be laying off most of their work force and outsourcing to Mexico. My brother in law lost his job. If this one plant is an anomaly and not indicative of the management philosophy of GE in general, I could be wrong about the overall company, I have never tried to develop the skill of researching companies so you may know more about them than I do but they haven’t impressed me.

    Steve

    • says

      Steve,

      I knew GE would be a bit of a controversial pick, but I think this company is growing stronger by the day. The recent moves have been particularly impressive. It’s still a shadow of its former self, but that was when GE Capital was calling all the shots. They may not grow as fast as they were before, but it’ll likely be more sustainable this time around.

      Sorry to hear about the troubles your brother-in-law had with the GE plant. I’m sure a massive company like GE probably has instances where this occurs, and the recent cost-cutting by many firms across the board to increase earnings amid stagnant revenues has led to some job losses. I hope this trend reverses itself as the economy moves forward.

      Best wishes!

  6. says

    I love GE. It was one of my first stocks that I purchased as well. I have held on. I think I paid about $18 for 112 shares and have seen a few dividend increases in the past two years. I prefer averaging down when purchasing but I feel that GE will only continue to climb from hereon especially with dividend increases.

    • says

      $25000 Dividends,

      Glad to see a fan of GE in the mix. You got a great price on GE shares. I think you’ll see great capital appreciation on the price paid, as well as handsome dividend raises for the near future. I hope that the message Immelt is spreading about focusing on core industrial operations is exactly what they plan on doing.

      Best regards!

  7. says

    Hi Dividend Mantra,

    Glad to write to you again. Nice picks, but personally I prefer to stay away from GE until it trades down in the 22 to 21 range. I think the market is a bit overextended now and would rather do nothing, except investing in Net Cap Asset Value stocks.

    XOM is my preferred one, but as am already heavily invested in the oil business, I prefer not to add too many of these.

    It remains now GIS that pleases me a lot as to the dividend sustainability, as well as the fact that you always have to eat, but you can more easily reduce your oil consumption. Although I try to spare on every dime, the more I try, the more I eat and the less I drive.

    I believe that the future lies in agriculture and all the companies producing agricultural products, such as deere DE alamo group ALG mosaic MOS etc. jim rogers in an interview there shortly, said that most of the farmers in the United States have between 55 and 65 years old, and there are very few young people who have studied agriculture to replace them.

    It’s great to read you, because every time you push me to improve myself and to reconsider my investment policies

    Be careful anyway, this market looks shaky to me

    • says

      Aspenhawk,

      I hear you on driving less and eating more! I do love some good food! :)

      Life is good, right?

      Great ideas there on investing in agricultural companies. As the global population grows there will only be increased demand on the world’s food supply and the ag resources needed to sustain it.

      It’s definitely a good idea to be prudent here. I’ve been deploying capital lately at a far more prodigious rate than I had planned on, but I’ll continue to buy high quality value wherever it is.

      Take care!

  8. says

    Hi Dividend Mantra,

    Good picks currently GE, GIS, KO, WMT and CL are also on my watch list.
    I think I will buy some WMT if it comes down a little bit. I would like to buy a dividend payer with the potential to grow it with double digits.

    RDSB is a good pick. BP is also attractive with the current yield of 5% with room to grow.

    I can also recommend you to take look at Hasbro and Unilever.
    You can compare Unilever with PG, Unilever derives 55% of its sales from emerging markets. Unilever is also a dividend contender.

    Have nice weekend!

    • says

      Trader666,

      WMT is attractively valued here. The only reason it didn’t make it on this list is because I already have a fair allocation to the company. I’m not overly enamored with retail companies in general, and prefer the companies that make the products that fill retailer’s shelves.

      I like Unilever quite a bit. I missed it before the big run, but would love to buy UL shares when/if they come back down. They’re just a tad expensive right now.

      I like BP, and anticipate shares doing well over the long run. I’m just still a little concerned about the ongoing litigation.

      Best wishes!

  9. says

    I picked up some XOM earlier this week so I’m on board with that one although I’m hoping to add more in about the range you’re targeting. I like the core of GE but their exposure to GE Capital still bothers me. I’ll have to look more into that to see what they’ve done to mitigate it’s effects. Most of the companies I really want to own are all just out of my price targets. Although I have stretched a bit on a few purchases to get some more capital invested. WMT is another company I like and added to even though the starting yield is low.

    • says

      Pursuit,

      Nice buy on XOM. I noticed it fell below $90 not long ago. That’s when the yield starts approaching 3% and I start getting very interested. RDS.B and CVX are also nice plays here right now.

      I agree with you on GE. GE Capital is still a major portion of the business, and I would like to see it reduced further. The good news is that management is on the same page and they are simultaneously reducing GE Capital’s balance sheet and increasing the capital/focus into core businesses like jet engines, locomotives, energy infrastructure and the like. We’ll see how it turns out, but if they stick to the plan I like the odds.

      WMT is another fine pick. I already have a decent size position (for my current portfolio size) and like I said above I’m not overly enamored with retail companies. However, it’s hard to compete with a juggernaut like WMT. Great company. The biggest concern I have is a squeeze from both smaller operators (like the dollar stores) and online purveyors (namely Amazon).

      Take care!

  10. says

    These are all great companies with long track records of being successful, so I can see why they would be good investments. The entry yields may be a bit low, but if they continue to grow they may prove to be great dividend stocks.

    • says

      Jake,

      These are all great companies. Very long track records for all of them, some dating back more than a century. We’re talking Thomas Edison and Rockefeller here!!! :)

      Best wishes.

  11. says

    I already own GE, CVX, RDS.B, and GIS. XOM has bounced off a 3% yield several times before and that is what I’m waiting for to take a position. Time will tell whether I am being patient or greedy with that approach.

    • says

      S.B.

      Great stuff! You’ve got some great holdings there. You also have a sizeable portfolio. I’m envious! :)

      I’m with you on XOM. Getting an entry yield of 3% on a great company like that, which would be well above the historical norm, would be fantastic!

      Best regards.

  12. Anonymous says

    All three can be purchased at a lower cost than brokerage commissions through a DSPP from Computershare and Wells Fargo. Why buy one when you can get all three for lower fees/costs via DSPP then your brokerage commissions.
    I mentioned DSPP via Wells Fargo and Computershare to you several months ago. Most cost effective why to dollar cost smaller amounts of money over time.

  13. says

    I’m on board with XOM and GIS (I own GIS already) both I think are safe picks. GE scares me though, the stock absolutely plummets under adversity and that level of movement scares me too much. Hopefully the changes you mentioned will help the stock be more defensive these days.

    • says

      Captain,

      I don’t blame you for being unsure about GE. I’m sure many investors are.

      I think GE is going to emerge as a stronger and more stable company. There’s still uncertainty to be sure, but many times it’s uncertainty that allows an intelligent investor to take advantage and invest at attractive long-term prices.

      Stay in touch!

      Best regards.

  14. Anonymous says

    Hi DM,

    Didn’t you own XOM at some given point and then you sold it? Was there any reason that you sold it back then? I may be getting confused with some other stock.

    • says

      Anonymous,

      I did own XOM. It was actually one of the very first dividend growth stocks I purchased, way back in the summer of 2010. I discussed the sale of XOM here:

      http://www.dividendmantra.com/2012/02/recent-sale.html

      I then promptly used that capital to buy shares in two utilities:

      http://www.dividendmantra.com/2012/02/recent-buy_27.html

      In the end it worked out fantastically, because XOM is only up a few bucks from my sale price, while UNS ran up quite a bit for me and AVA has been solid as well. However, I still regret that sale. It was a mistake on my part to sell a high quality company that hadn’t had a fundamental business change, didn’t cut the dividend and the valuation wasn’t crazy. I plan on selling even less in the future, even as my sells to date are very few.

      Hope that helps!

      Best wishes!

  15. Spoonman says

    Thanks for pointing those out, they are all excellent companies to watch. Of the three that you mentioned, XOM was one of the first companies I bought (got it when it was like $58). I’ve always wanted to own GIS, but it never dipped low enough for me to buy, or when it did all of my capital was tied up elsewhere. I’m gonna wait until it cools off a bit more before I start a position.

    Like others here, I have my reservations about GE. I suppose since we are still quite young and have a time horizon of several decades, betting on a company like GE might not be a bad idea.

    • says

      Spoonman,

      I bought into XOM right around $60 before I sold it. I regret that sale, even though it worked out quite well. I hope to change that behavior in the future. It’s a great, great company. I will give myself a little credit as when I sold it XOM had been raising the dividend at a rather slow rate. They’ve since picked up the pace, which is wonderful.

      I can understand your reservations on GE. I think the negative investor sentiment is helping to keep GE shares down a bit even as they are rapidly improving the business. I’d love to see it drop down to $22 or less and I’d be all over it. I think shares are attractive even where they’re at, however.

      Hope all is well with the journey! :)

      Take care.

  16. Chad says

    I’m a big believer in GE. Loaded up when it was under $15/share. Still like it at its current price, but since it’s over 5% of my portfolio, I’m a little hesitant to buy more. Though a drop below $20 will probably have me wanting to up GE to a 10% allocation.

    Really like that GE is selling off their non-core assets. They need to just concentrate on what they do best.

    GIS and XOM are on my radar. Currently don’t own either, but would like to own both soon.

    • says

      Chad,

      Another fan of GE! This company is polarizing, isn’t it?

      Great job buying at under $15 per share. You got in at a great price. I cannot imagine you not doing very well with that kind of cost basis over the long haul. The projected growth, if realized, ensures a great little wealth building cog in your machine. Best of luck with that, and I may join you as a GE shareholder.

      Best regards!

  17. Dave says

    Hey Dividend Mantra!
    Nice picks of GE and RDS-b, in my opinion. I own both. I feel that GE is the quintessential play on the American economy. If you believe in American business, you should believe in GE. (The job outsourcing, etc. does bother me, but I cannot stop it and I am in this to make $) I feel GE will slowly return to it’s perch of greatness among US companies. Must be patient.
    Also, At current levels, and with history on it’s side, Shell is another worldwide giant. Believing in it’s history and the future of energy demand makes if a buy. It’s yield and chart history makes me feel confident in its margin of safety at these prices.
    FYI, if it helps anyone: I take a more active approach to dividend investing. I will watch my holdings for extreme short term runups and then trim positions, only to buy them back lower. It usually always decreases my cost basis and does not take much extra effort, nor does it disturb my overall income from my holdings.

    You have created something great here on your site!! Kepp up the good work and thank you for helping many people!

    • says

      Dave,

      Hey, thanks for stopping by. Glad you enjoy the blog. I hope you stick around! :)

      Great thoughts there on GE and RDS.B. GE should return to some of the old American greatness via focusing on manufacturing and infrastructure, and away from finance. We’ll see how it turns out, but it could be a bit of a renaissance.

      As far as RDS.B, it’s the cheapest oil supermajor outside of BP. However, with BP you’re also buying into ongoing spill litigation. Shell has no such issue currently. Shell is currently selling for just above book value, and the entry yield is higher than a lot of slow growing utilities. There’s a lot to like there. I’d eventually like to own a piece of most of (if not all) the supermajors to own a piece of Big Oil while mitigating risk with one company and black swan events like spills.

      Stay in touch!

      Best wishes.

  18. Anonymous says

    I find this line amusing “Jeffrey Immelt, the CEO of GE, has publicly stated that shareholder returns, and the growth of the dividend, is a priority”. Yet in 2008 he went on record saying the dividend is safe. I don’t have the article in front of me but I recall it being repeating on CNBC and reading numerous articles stating this back in 2008/09. This was the best I could find to reference this:

    GE spokesman Gary Sheffer responded to the question by quoting from a company press release sent out in September: “GE also stated that its Board of Directors had approved management’s plan to maintain GE’s quarterly dividend of $0.31 per share, totaling $1.24 per share annually, through the end of 2009.” And on Thursday morning, the company repeated its assurance that it plans to keep its dividend through 2009. Comment found here: http://money.cnn.com/2008/11/12/magazines/fortune/benner_ge.fortune/index.htm

    I guess the reason I don’t believe what ANY CEO/board says anymore is because I got burned when I held GE through their dividend cut BECAUSE I believed Jeffery Immelt. Now they want investors to think its all better now. Maybe it is, until the next crisis hits, and the next round of shareholders get burned believing dividend is safe.

    Lastly, I find it helpful to review articles from back in 2008-09 when the markets were crashing. It was a scary time frame for all investors. Looking back the solution is always easy but going through it was a different story. Check out fellow dividend blogger DGI article from 2008 here: http://www.dividendgrowthinvestor.com/2008/12/is-ges-dividend-safe.html

    • says

      Anonymous,

      Thanks for stopping by and offering up your opinion on GE. I do appreciate it.

      I can completely understand where you’re coming from. In fact, it’s exactly because of Immelt’s missteps during the crisis that has kept me from seriously investing in the company once I had a firm grasp on what I was doing.

      I agree that Immelt made a big mistake calming investors and reassuring of performance/dividend numbers just days before the truth came out. In his defense, however, he inherited a bit of a mess from Jack Welch and GE Capital was way bigger than it should have been. I had read that he was counting on GE Capital to save the day near the end of that quarter, and then it didn’t happen. I suppose that’s when they realized how bad GE Capital really was?

      To be sure, I think Immelt has done a great job since the crisis. And it’s not all talk, so there is no worry about having to believe what management is saying. They’re actively selling off non-core assets and reducing GE Capital. The proof is in the pudding, and that’s why I’m just now coming around to warming up to the idea of owning a piece of GE.

      Would GE do better if we faced another crisis of that magnitude? Hopefully, but like you say it’s hard to tell until you’re actually in it. I think they’ll be better suited for the future once GE Capital is under control. Certainly the manufacturing and infrastructure business is very cyclical, but one should know that going into owning a piece of any industrial company. If they can reduce GE Capital down to about 30% of earnings (currently around 40%), I think that would be a great way to still profit from the finance sector while focusing over 2/3 of the company on core business segments.

      This is a great article recently penned about GE, if you’re interested:

      http://seekingalpha.com/article/1449961-general-electric-looks-as-if-it-s-becoming-the-shareholder-friendly-company-it-once-was

      Best wishes!

  19. Anonymous says

    What’s up D. Mantra,

    I own GIS so, of course, I won’t fault you on that one. Ha! ;)

    You mentioned the Oracle of Omaha early in your article here. Shortly before Berkshire co-bought HNZ recently, many were speculating that GIS was a top Buffet target for acquisition. Who knows? Still could be at some future point.
    When he bought HNZ, I read a comment by a blogger on SA that I thought was rather humorous. The blogger owned HNZ for the dividends and, even though he made a nice cap gain when it got bought out, he wasn’t happy that a good dividend payer was removed from his portfolio (esp. at a time when finding attractively valued stocks is getting difficult). He basically said that he greatly liked and admired Buffet but also said “Man I’m gonna be pissed if he buys another one of my stocks. Try to leave some for us.” I got a chuckle out of that. I’m sure he was being partly facetious but still making a point.

    I think I’d feel the same if Buffett ever buys out GIS. Sure, I’d make a nice cap gain but I don’t relish the idea of trying to replace a quality dividend payer like GIS in my portfolio.

    Buffet uses the analogy of hunting for “elephants” (like HNZ) with his elephant gun. You’ve used the analogy that you have a smaller 9mm instead. I’m NOT trying to disparage you, me or any other retail investor, but I think the more appropriate analogy is that while Buffet shoots his elephant gun, we actually are shooting spitballs. All’s still good though. I used to have great fun shooting spitballs in school and they still got the job done. Ha! :)

    Don’t get me wrong. Like you, I respect and like Buffet. What would you recommend as far as readings by/about him? I know there’s the Berkshire letters but he doesn’t write any books. Probably a lot of books have been written about him and his investment philosophy but I wonder which ones are more worthy. Any recommendations?

    As usual, much appreciated.

    -Rock the Casbah

    • says

      Rock,

      I always appreciate your lively commentary. I’m always glad to see you stop by! :)

      I’m with you on the spitballs! I think at one point I talked about my weapon of choice being a pea shooter (same thing, basically).

      I do remember some rumors regarding Buffett and GIS before the HNZ deal was closed. I’m glad it wasn’t GIS, to be honest with you. That one is still on the table for the rest of us. Hopefully Buffett is done buying for a while so I can build up my portfolio. :)

      As far as books on Buffett, the only one I’ve read specifically about him was “Tap Dancing to Work”, which was a collection of shareholder letters Buffett penned and articles in Fortune magazine about Buffett. I enjoyed the book quite a bit, but if you’ve already read his stuff in depth it probably won’t offer anything new. I liked that it was generally organized in three parts: Buffett the investor, Buffett the businesmann, Buffett the philanthropist. The articles progressed from investor (early Buffett) to philanthropist (Buffett today). Great stuff.

      That being said, I hear “The Snowball: Warren Buffett and the Business of Life” is fantastic as it’s the only authorized biography (that I’m aware of) of Buffett as he was personally involved in the project.

      Best wishes!

    • Scott says

      I’m not the SA blogger, but that was almost word for word what I have been thinking ever since I heard Buffet was taking over Heinz. Three(?) years earlier it was BNSF getting knocked out of my Roth IRA courtesy of him. If he does this one more time, as the saying goes… I’m gonna have to hurt him.

  20. Anonymous says

    I would be careful with GE. Their gas and wind turbines were real money makers at one time, but that industry has faced major problems (GE didn’t sell one gas turbine in the U.S. last year, all were overseas sales)and Immelt is not well-liked in the company.

    • says

      Anonymous,

      GE is certainly not all roses, but no company is. I think they’ll emerge much stronger over the future than they were before the crisis. I think that there are certain business segments that could use improvement, and one also has to remember that the entire world is slow to move to certain alternative energy sources. Over time, I think GE will be a leader in energy infrastructure no matter the energy source. The large R&D spending almost ensures this.

      Best regards!

  21. Anonymous says

    gis is a great stock,and so is xmo. ge is not very nice to its employees or so I have read. Jack Welch used to fire 10% of the employees every year and hire new ones of thousands of good companies out there I can find another that’s just me

    • says

      Anonymous,

      I wasn’t aware of Jack Welch firing so many employees, and I’m not quire sure it was Jack doing the firing if there was that much turnover during his tenure as CEO. Typically, hiring/firing is usually the responsibility of unit managers.

      I think GE is a high quality company at current prices. One has to keep in mind that during Jack Welch’s days at the helm, GE was significantly overpriced. Immelt took over when the stock was a rocket running out of fuel and had nowhere to go but down. Immelt has made mistakes, but I don’t blame him for the underperformance of GE shares after such lofty valuations.

      Take care!

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