'Warren Buffett shares' on the ASX could be the best way to invest right now.
There are certainly some great growth shares that could be worth investing for the long-term like Bubs Australia Ltd (ASX: BUB) and Altium Limited (ASX: ALU). However, for various reasons (including very low interest rates), businesses with lots of potential growth are being also being priced highly.
But there are some shares that still seem like they're trading at reasonable valuations to me, outside of the tech sector. Warren Buffett's share picks that made him big returns over the decades weren't exactly pure tech plays.
But don't forget, any decent business these days is using technology to make their business more efficient. From automated trucks for big miners like BHP Group Ltd (ASX: BHP) to the tech systems used by Transurban Group (ASX: TCL) to manage the tolls. Technology can still be involved in other industries.
If Warren Buffett invested in ASX shares, I think he'd be very interested in the below two businesses.
Warren Buffett shares: Washington H. Soul Pattinson and Co. Ltd (ASX: SOL) and Brickworks Limited (ASX: BKW)
Both of these businesses are closely linked to each other.
Soul Patts owns 44% of Brickworks and Brickworks owns 39.4% of Soul Patts. This partnership goes back decades to a time when corporate raiders were more common. If they both owned big chunks of each other then it would hopefully stop aggressive investors trying to come in and split them up into pieces.
Soul Patts is a diversified investment conglomerate and I'd describe Brickworks a diversified property business. I think they're both 'Warren Buffett shares' because of their long-term focus, aligned management and the aim of being quality.
Brickworks
Brickworks is best known as a building product business. In Australia it has a number of key divisions including Austral Bricks, Bristle Roofing, Austral Masonry and Austral Precast. Each of these businesses are among the leading suppliers in their respective markets.
Brickworks also has a USA division. The company made three acquisitions over the past couple of years and now it's the leading brickmaker in the north east of the US.
I'm very excited by Brickworks' industrial property trust. COVID-19 has caused properties involved with logistics and ecommerce to be in even higher demand. There are currently two large distribution warehouses being built for Coles Group Limited (ASX: COL) and Amazon. Once complete, the rental income should rise and the gross assets of the trust is expected to go above $3 billion.
I think Brickworks is a Warren Buffett share not only due to everything I've already mentioned, but also because Clayton Homes is one of Berkshire Hathaway's larger businesses – it shows he likes to be involved in property (with the right business).
Soul Patts
Soul Patts could be the best Warren Buffett-like share on the ASX. It operates in a similar way to Berkshire Hathaway. Soul Patts invests in both publically listed and private businesses. Aside from Brickworks, some of Soul Patts' other major investments include TPG Telecom Ltd (ASX: TPG), Clover Corporation Limited (ASX: CLV), Milton Corporation Limited (ASX: MLT) and Bki Investment Co Ltd (ASX: BKI).
The investment house tries to invest with a contrarian strategy whilst being defensively positioned. Some of its investments include resources and agriculture, which largely have different returns profiles to the normal share market.
The 'Warren Buffett share' continues to diversify its portfolio. It will soon supposedly be investing in regional data centres.
I think they're both pretty cheap
Brickworks looks the cheaper of the two after the COVID–19 decline. If you just take the pre-tax value of the Soul Patts shares and net asset value of the property trust, the rest of Brickworks is essentially free.
At the current Brickworks share price it comes with a grossed-up dividend yield of 5%.
There isn't a clear net asset discount with Soul Patts like there is with Brickworks. But it does offer more diversification and it has a great dividend growth record – it has increased its dividend every year since 2000.
At the current Soul Patts share price it has a grossed-up dividend yield of 4.4%.
