Many times investors see how well a stock is performing by quickly looking at its stock chart. Up – good, down – bad. Not the best stock valuation technique, yet still it is done. The age-old adage of ?buy low, sell high? is seldom followed and investors still wonder why great gains are elusive.
Warren Buffett, the #3 richest person in the world, advised investors to imagine they were the richest person in the world who could buy whole companies. If you wouldn?t be happily satisfied owning a company outright because of its earning and growth potential, then why would…
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Many times investors see how well a stock is performing by quickly looking at its stock chart. Up – good, down – bad. Not the best stock valuation technique, yet still it is done. The age-old adage of “buy low, sell high” is seldom followed and investors still wonder why great gains are elusive.
Warren Buffett, the #3 richest person in the world, advised investors to imagine they were the richest person in the world who could buy whole companies. If you wouldn’t be happily satisfied owning a company outright because of its earning and growth potential, then why would you own even one share of it? He stressed that kind of research and conviction for stock picking.
Two of Buffett’s favourite (and satisfyingly successful) investments are in insurance and Coca-Cola. Foolish readers could imitate some of his winning ways by having Suncorp Group Ltd (ASX: SUN) and Coca-Cola Amatil Ltd (ASX: CCL) in their portfolio.
— Suncorp has risen about 15% to $13.57 since early February, which would have satisfied a regular price gain target for a whole year, but the stock has more to offer in the coming years. The company has strengthened its balance sheet with surplus capital exceeding $1.2 billion.
At the same time, it is streamlining the business with a simplification program which is projected to realise about $265 million in cost savings by 2016. That could be used towards a combination of higher earnings per share and making its products more affordable and competitive versus other insurers.
If you like special dividends potentially on top of the huge 5.0% fully franked dividend yield it offers now, then stick with Suncorp because it has said it intends to have a capital return of excess surplus capital in the near future. The company has a good history of rewarding shareholders periodically with special dividends.
— Coca-Cola Amatil, the bottler and distributor of Coca-Cola and many other beverages in Australia, is 29% owned by The Coca-Cola Company (NYSE: KO), its major shareholder, so there is a strong link with the soft drink giant. The company has a big following among value investors who recognise the very strong brand name and competitive benefits of the business.
In addition, it has returned to the alcoholic beverages market in December 2013, distributing such famous brands as Jim Beam, Maker’s Mark, Galliano and Canadian Club. These alcoholic drinks usually attract premium prices and better margins, so that’s a great plus for potential earnings.
Recently, its non-alcoholic drinks have experienced a weaker market and pricing competition. The company flagged a 15% projected fall in earnings, sending the stock plummeting to about $9.00. Not fun, but it gives Foolish investors a chance to take advantage of short-term weakness to buy into the quality stock at discount prices. Also, it has a fantastic 5.4% yield currently. Keep your eye on the long-term and add this one to your portfolio.
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Motley Fool contributor Darryl Daté-Shappard does not own shares in any company mentioned.