3 UK shares I think Warren Buffett would buy today
The Motley Fool
Published Aug 12, 2020 07:07
3 UK shares I think Warren Buffett would buy today
US billionaire investor Warren Buffett has a well-deserved reputation for picking long-term winners. In this piece, I’m going to suggest three UK shares I think the Oracle (NYSE:ORCL) of Omaha might buy today.
Buffett’s investments often follow one of a handful of themes. Each of the stocks I’ve chosen plays to one of these long-running themes. I think they could all be winners from current levels.
A cheap insurer One of the first investments made by Buffett’s group, Berkshire Hathaway (NYSE:BRKa), was US motor insurer Geico. Today, Berkshire owns stakes in several large US insurers.
I believe insurers are among the most attractively valued UK shares today. My top pick of these is FTSE 100 firm Aviva (LSE: LON:AV). This group’s diverse business includes life insurance and general insurance, such as travel and motor cover. Aviva also operates in a number of markets outside the UK, including Canada, Europe, and parts of Asia.
New boss Amanda Blanc has pledged to streamline the business and improve returns. In the meantime, I think the shares offer terrific value. As I write, the Aviva share price is just under 300p. At this level, this UK share trades at a 15% discount to its net asset value of 473p per share.
Aviva’s low growth rate has discouraged investors. But cash generation remains good and dividend payments have now restarted. I think shareholders can expect a dividend yield of 6% or more from current levels. I see this as a classic long-term Buffett buy.
I’ve bought this fast-growing UK share Another popular theme for Buffett’s investments is everyday retail. He owns stakes in US supermarket Kroger (NYSE:KR) and wholesaler Costco (NASDAQ:COST), as well as consumer goods companies including Kraft Heinz (NASDAQ:KHC).
Buffett might into one of the big UK supermarkets, but I think he might be more tempted by fast-growing discount retailer B&M European Value Retail (LSE: BME). B&M keeps shoppers coming back with a core range of popular products at keen prices, mixed with frequent new promotions. I think it’s a winning formula that still has room to grow.
Sales at B&M rose by 16.5% to £3.8bn last year and this UK share has risen by 50% over the last 12 months. The group traded well through lockdown and management recently increased its profit guidance for the first half of the year.
B&M shares currently trade on 16 times forecast earnings, with a well-covered dividend yield of 2.1%. I rate them as a buy.
A television bargain? Another significant theme in Berkshire Hathaway’s stock portfolio is television. The group owns stakes in a number of cable television companies and other media firms. The UK television market is a little different, but I think FTSE 100 group ITV (LSE: LON:ITV) offers the kind of cash-generating value that might tempt Buffett.
Get The App
ITV stock looks battered at the moment, thanks to the downturn in television advertising spending. Competition from streaming services is certainly tough, but it’s worth remembering ITV’s Studio business produces programmes for many of these online services.
As I’ve explained before, I think ITV’s programme-making business alone could be valuable enough to justify the price of this UK share. In my view, the broadcast business is almost being thrown in for free. I continue to think ITV is just too cheap, and remain a long-term buyer.
The post 3 UK shares I think Warren Buffett would buy today appeared first on The Motley Fool UK.
us better investors.
Motley Fool UK 2020
First published on The Motley Fool
Written By: The Motley Fool
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.