I view Warren Buffett as one of the world's greatest investors following his excellent track record at Berkshire Hathaway. I think it's worthwhile asking whether Buffett would be interested in Washington H. Soul Pattinson and Co. Ltd (ASX: SOL).
Soul Patts may well be one of the most similar businesses to Berkshire Hathaway from across the world. They are both essentially investment conglomerates, with both privately-owed and public investments.
The holdings are fairly different, but the idea is the same: invest in various opportunities for the long-term to the benefit of shareholders. They both have a multi-decade track record of making good investments and have typically not relied on the technology sector for those returns.
Berkshire Hathaway's core long-term profit drivers have been industries like insurance, railroads and Coca Cola.
Would Warren Buffett like what Soul Patts has to offer?
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Defensive and growing holdings
The Soul Patts portfolio is invested in a number of different areas, giving it strong diversification.
It's invested in areas like energy, resources, telecommunications, building products, property, credit, swimming schools, water entitlements, funerals, electrification, financial services and plenty more.
The Australian investment conglomerate has deliberately focused on areas that it believes can provide defensive cash flow. I think Warren Buffett would find that ability to generate resilient earnings a pleasing positive about Soul Patts.
What may also be appealing about Soul Patts is that it's willing to invest across different geographies and markets. It's increasingly looking at international businesses, which gives the business a much wider investment universe to look for opportunities.
What else may Warren Buffett like about Soul Patts?
Soul Patts can offer income investors a number of positives.
It doesn't have the largest yield on the ASX, but I think it's a good starting point. It also offers long-term capital growth potential, as its portfolio grows in value over time through the expansion of existing investments and the addition of new ones. It currently has a grossed-up dividend yield of 3.4%, including franking credits, at the time of writing.
It has also increased its regular annual dividend per share each year since 1998, the best track record of consistent dividend growth on the ASX. Who doesn't love reliability when it comes to payouts?
The defensive asset base and healthy dividend payout ratio allow the business to regularly grow its payments. I expect Soul Patts to continue growing its payout for many years.
Is it a great buy today?
I think Soul Patts is one of the best businesses on the ASX, but it's now regularly trading at a decent premium to its net asset value (NAV). Warren Buffett prefers to buy wonderful businesses at fair prices, which I think may describe Soul Patts right now. It's not cheap though.
I'd happily buy a few Soul Patts shares today for the long-term, though I wouldn't buy significant sums. If I could speak to Warren Buffett, he may say there are better value opportunities out there.
