Warren Buffett has a fantastic investment track record, he has shown an incredible skill at investing money through Berkshire Hathaway. It's worthwhile asking whether the 'Oracle of Omaha' would be interested in buying some of the best Australian companies, like Wesfarmers Ltd (ASX: WES) shares.
Berkshire Hathaway has a very limited track record of actually investing in ASX shares, with Insurance Australia Group Ltd (ASX: IAG) being a notable example.
So, I'm going to hypothesize whether Buffett would actually interested in buying the parent business of Bunnings, Kmart, Officeworks, WesCEF and Priceline. I don't know Buffett and he hasn't given me an inside scoop into what he actually thinks about Wesfarmers shares, but I'll give some thoughts.
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Loves high-quality
Warren Buffett and Charlie Munger have professed their preference for decades about owning high-quality businesses over average businesses. Over the long-term, it's those leading businesses that tend to produce excellent profit growth and strong shareholder returns.
As Warren Buffett once said:
It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.
I'd certainly categorise Wesfarmers as a wonderful company, with Bunnings and Kmart being clear leaders in the hardware and general merchandise spaces. They're able to offer customers great value and also earn incredible returns on capital (ROC) for a retailer.
I think some of the best investments have also shown an ability to diversify their growth avenues. Names like Microsoft, Alphabet, Amazon and Apple have done an excellent job at creating/acquiring new products or services to boost the earnings outlook.
Wesfarmers has invested in different avenues to help grow earnings, such as healthcare, lithium mining and international expansion for Anko products.
I believe Buffett would like the quality standards of Wesfarmers shares.
Likes consumer-facing businesses
Would Buffett actually invest in a business like Wesfarmers when it's mostly a retail company?
Berkshire Hathaway does own a number of consumer-facing businesses including Jordan's Furniture, Fruit of the Loom, Duracell, Clayton Homes, Star Furniture, See's Candies, Dairy Queen, Forest River, Coca Cola, Apple, American Express and more.
Like Wesfarmers, Berkshire Hathaway also has plenty of other types of businesses such as GEICO, BNSF (railroads), NetJets, General Re and more. Wesfarmers is involved in other areas with a chemicals, energy, fertilisers division (WesCEF) and an industrial and safety division.
Would Warren Buffett buy Wesfarmers shares today?
If the Berkshire Hathaway talisman were looking for ASX shares to invest in, I think Wesfarmers would definitely feature on his watchlist. If he'd bought a long time ago, he'd be a happy long-term shareholder, in my view.
However, the 30% rise of the Wesfarmers share price over the last year and approximately 110% in the past five years has led to an increase in the company's price/earnings (P/E) ratio.
He'd probably want to buy when there's a bit more uncertainty or lower valuation surrounding Wesfarmers. Even so, I think Wesfarmers shares could beat the S&P/ASX 200 Index (ASX: XJO) over the long-term because of its quality.
