Where would Warren Buffett invest his superannuation?

At 83 years of age and with more than $60 billion banked the world’s greatest investor probably wouldn’t need the investing advice of your average financial planner. Rather, Buffett is famous for giving out advice of his own. So let’s look at some of that advice and see if we can identify how Buffett may plan to invest his super kitty if he were an Australian national.

An active investor like Buffett would likely avoid the annuities offered by the likes of Challenger Ltd  (ASX: CGF) given the distinctly average rates of return in the current environment. It’s more likely Buffett would look to invest his money so that it pays an income that rises over time, meaning solid dividend-paying stocks may be his first port of call.

Buffett famously said: “Price is what you pay. Value is what you get.” So how would this apply to Buffett’s income hunt for his super investments? Remember the price of an investment can hide its real value because of temporary factors like low cash rates or tax considerations. These factors have seen the price of fully franked dividend payers like Commonwealth Bank of Australia (ASX: CBA) bid up by income-seeking investors.

Don’t forget the real value of a stock is related to its future cashflows and profits, not its current dividend yield. With that in mind Buffett would likely choose reasonably valued dividend payers like Westfield Corp (ASX: WDC)Insurance Australia Group Limited (ASX: IAG) or Coca-Cola Amatil Ltd (ASX: CCL).

Buffett also said: “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.” This suggests he would favour companies with competitive advantages and strong outlooks even if slightly expensive on an historical basis. Woolworths Limited (ASX: WOW) is the kind of wonderful company at a fair price he would look towards. A fair company at a wonderful price he might avoid is debt-soaked Fortescue Metals Group Limited (ASX: FMG), even if it does look cheap.

Buffett also said: “Someone’s sitting in the shade today because someone planted a tree a long time ago.”

Shareholders in TFS Corporation Limited (ASX: TFC) are enjoying life today as someone literally planted alot of trees a long time ago. TFS runs Indian sandalwood tree plantations in northern Australia and its business model demonstrates the benefits of long-term planning. Sandalwood is in strong demand globally, yet there is limited commercial supply as it requires extensive logistical planning to grow commercially.

TFS expects to record a record net profit after tax of more than $70 million in FY 14 and has plenty more room to acquire and develop sandalwood plantations across northern and western Australia. This suggests selling for $1.80 today it’s the kind of growth company with competitive advantages Buffett would look to when doing his superannuation planning.

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Motley Fool contributor Tom Richardson owns shares in Westfield Corp. You can provide feedback on Twitter @tommyr345

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