Bank of America (BAC)
Buffett bought $5 billion worth of Bank of America warrants to buy 700 million shares at $7.14 each until they expire in 2012, and perpetual preferred stock that yields $300 million a year. In his annual letter, Buffett said, ��ur warrants to buy 700 million Bank of America shares will likely be of great value before they expire.��Bank of America trades for $8.04 on Monday, giving Buffett a paper profit of $656 million already.
Bank of America had mixed financial results in 2011. Deposits declined from $13.6 billion in 2010 to $12.7 billion in 2011, as 9.6 percent of all bank customers switched banks, compared to 8.7 percent in 2010. Bank of America particularly suffered customer backlash from its attempt to raise fees in order to generate revenue. Revenue declined from $52.7 billion in 2010, to $45.6 billion in 2011. Net income increased to $1.4 billion in 2011 from a net loss of $2.2 billion in 2010.
Brian Moynihan, who Buffett extols in his shareholder letter, introduced Project New BAC, which aims to streamline the business. Phase one, which began in 2011, included the elimination of 30,000 jobs and reduction of costs by $5 billion per year by 2014. The company does not yet know where it will make reductions for Phase 2.
��t Bank of America, some huge mistakes were made by prior management. Brian Moynihan has made excellent progress in cleaning these up, though the completion of that process will take a number of years,��Buffett added in his letter.
Bank of America�� P/! E, P/B and P/S ratios:
BAC pe,ps,pb Interactive Chart
JP Morgan (JPM)
Buffett praised JPMorgan (JPM) on his recent interview with Becky Quick on CNBC. While he does not own the stock for Berkshire Hathaway, he said he bought it for his personal portfolio. The stock hit a low of $27.85 in November last year, but has since rallied to $39 per share.
Buffett did not go into detail about this holding, only mentioning that he admires CEO Jamie Dimon�� shareholder letters. ��e thinks well, and he writes extremely well,��Buffett said. He also said in his shareholder letter that he and Dimon share similar views on valuation. ��he first law of capital allocation ��whether the money is slated for acquisitions or share repurchases ��is that what is smart at one price is dumb at another. (One CEO who always stresses the price/value factor in repurchase decisions is Jamie Dimon at J.P. Morgan; I recommend that you read his annual letter.)��Buffett said.
The bank has also been steadily growing revenue and earnings. Revenue increased from $67.3 billion in 2008, to $100.4 billion in 2009, and $102.7 billion in 2010. For the full year 2011, revenue slipped to just under $100 billion. Earnings increased from $5.6 billion in 2008 to $9.3 billion in 2009, to $17.4 billion in 2010. For the full year 2011, it generated record net income of $19 billion. It also still pays a dividend, which it has increased for the last three years and that most recently reached $3.96 per diluted share in 2010. Return on tangible common equity was approximately 15 percent for 2011.
JPMorgan�� P/E, P/B and P/S ratios:
WFC pe,ps,pb Interactive Chart
Wells Fargo (WFC)
After the fourth quarter, Buffett owns 7.6 percent of Wells Fargo (WFC), a stake for which he paid $9.1 billion and that is now worth $11 billion. The total holding includes a $1 billion addition he made to the position in the fourth quarter.
Buffett said of the bank in his annual letter, ��h! e banking! industry is back on its feet, and Wells Fargo is prospering. Its earnings are strong, its assets solid and its capital at record levels.��
Most recently, in the fourth quarter, Wells Fargo grew earnings, revenue, loans, deposits and capital. It has grown in most areas over the long term. Wells had been increasing its revenue since 2006, but it fell slightly from $88.7 billion in 2009 to $85.2 billion in 2010, and is at $81.2 billion for the trailing 12 months. Earnings have increased each year since 2008 and reached a record $15.9 billion in 2011, a 28 percent increase from 2010. In spite of the high bank-switching levels for the year, it grew deposits by $72 billion, or 9 percent.
The bank repurchased 86 million shares of its common stock and redeemed $9.2 billion of its high-cost trust preferred securities. The year also marked the completion of the conversion of its Wachovia retail banking stores, which was the largest conversion in banking history. By the second quarter of 2012 it expects its expenses to decline by $500 million to $700 million from the first quarter due largely to the elimination of merger expenses.
Wells Fargo�� P/E, P/B and P/S ratios:
WFC pe,ps,pb Interactive Chart
See Warren Buffett�� fully updated portfolio here or check out the Undervalued Stocks, Top Growth Companies, and High Yield stocks of Warren Buffett.
10 Best Undervalued Stocks To Own Right Now: Dollar Tree Inc.(DLTR)
Dollar Tree, Inc. operates discount variety stores in the United States and Canada. Its stores offer merchandise primarily at the fixed price of $1.00. The company operates its stores under the names of Dollar Tree, Deal$, Dollar Tree Deal$, Dollar Giant, and Dollar Bills. Its stores offer consumable merchandise, including candy and food, and health and beauty care, as well as household consumables, such as paper, plastics, household chemicals, in select stores, and frozen and refrigerated food; variety merchandise, which includes toys, durable housewares, gifts, party goods, greeting cards, softlines, and other items; and seasonal goods, such as Easter, Halloween, and Christmas merchandise. As of April 30, 2011, it operated 4,089 stores in 48 states and the District of Columbia, as well as 88 stores in Canada. The company was founded in 1986 and is based in Chesapeake, Virginia.
Advisors' Opinion:- [By Paul Ausick]
Dollar General�� share price is up less than 6% in the past 12 months, but since the beginning of the year shares have risen more than 22%. And even then, Dollar General�trails Dollar Tree Inc. (NASDAQ: DLTR) in share price growth since January 1. Dollar Tree stock is up 30%.
10 Best Undervalued Stocks To Own Right Now: Caterpillar Inc.(CAT)
Caterpillar Inc. manufactures and sells construction and mining equipment, diesel and natural gas engines, industrial gas turbines, and diesel-electric locomotives worldwide. It operates through three lines of businesses: Machinery, Engines, and Financial Products. The Machinery business offers construction, mining, and forestry machinery, including track and wheel tractors, track and wheel loaders, pipelayers, motor graders, wheel tractor-scrapers, track and wheel excavators, backhoe loaders, log skidders, log loaders, off-highway trucks, articulated trucks, paving products, skid steer loaders, underground mining equipment, tunnel boring equipment, and related parts. It also manufactures diesel-electric locomotives; and manufactures and services rail-related products and logistics services for other companies. The Engines business provides diesel, heavy fuel, and natural gas reciprocating engines for Caterpillar machinery, electric power generation systems, marine, petrol eum, construction, industrial, agricultural, and other applications. It offers industrial turbines and turbine-related services for oil and gas, and power generation applications. This business also remanufactures Caterpillar engines, machines, and engine components; and offers remanufacturing services for other companies. The Financial Products business provides retail and wholesale financing alternatives for Caterpillar machinery and engines, solar gas turbines, and other equipment and marine vessels, as well as offers loans and various forms of insurance to customers and dealers. It also offers financing for vehicles, power generation facilities, and marine vessels. The company markets its products directly, as well as through its distribution centers, dealers, and distributors. It was formerly known as Caterpillar Tractor Co. and changed its name to Caterpillar Inc. in 1986. Caterpillar Inc. was founded in 1925 and is headquartered in Peoria, Illinois.
Advisors' Opinion:- [By Paul Ausick]
When Caterpillar Inc. (NYSE: CAT) reported earnings in July, the company took the opportunity to cut its revenue and earnings guidance for the full fiscal year. Mining equipment maker Joy Global Inc. (NYSE: JOY) reported third fiscal quarter results Wednesday morning and reaffirmed the lowered guidance it gave at the end of the second quarter.
Top 5 Canadian Companies To Watch In Right Now: Tupperware Corporation(TUP)
Tupperware Brands Corporation operates as a direct seller of various products across a range of brands and categories through an independent sales force. The company engages in the manufacture and sale of kitchen and home products, and beauty and personal care products. It offers preparation, storage, and serving solutions for the kitchen and home, as well as kitchen cookware and tools, children?s educational toys, microwave products, and gifts under the Tupperware brand name primarily in Europe, Africa, the Middle East, the Asia Pacific, and North America. The company provides beauty and personal care products, which include skin care products, cosmetics, bath and body care, toiletries, fragrances, nutritional products, apparel, and related products principally in Mexico, South Africa, the Philippines, Australia, and Uruguay. It offers beauty and personal care products under the Armand Dupree, Avroy Shlain, BeautiControl, Fuller, NaturCare, Nutrimetics, Nuvo, and Swissgar de brand names. The company sells its Tupperware products directly to distributors, directors, managers, and dealers; and beauty products primarily through consultants and directors. As of December 26, 2009, the Tupperware distribution system had approximately 1,800 distributors, 61,300 managers, and 1.3 million dealers; and the sales force representing the Beauty businesses approximately 1.1 million. The company was formerly known as Tupperware Corporation and changed its name to Tupperware Brands Corporation in December 2005. The company was founded in 1996 and is headquartered in Orlando, Florida.
10 Best Undervalued Stocks To Own Right Now: Schlumberger N.V.(SLB)
Schlumberger Limited, together with its subsidiaries, supplies technology, integrated project management, and information solutions to the oil and gas exploration and production industries worldwide. The company?s Oilfield Services segment provides exploration and production services; wireline technology that offers open-hole and cased-hole services; supplies engineering support, directional-drilling, measurement-while-drilling, and logging-while-drilling services; and testing services. This segment also offers well services; supplies well completion services and equipment; artificial lift; data and consulting services; geo services; and information solutions, such as consulting, software, information management system, and IT infrastructure services that support oil and gas industry. Its WesternGeco segment provides reservoir imaging, monitoring, and development services; and operates data processing centers and multiclient seismic library. This segment also offers variou s services include 3D and time-lapse (4D) seismic surveys to multi-component surveys for delineating prospects and reservoir management. The company?s M-I SWACO segment supplies drilling fluid systems to improve drilling performance; fluid systems and specialty tools to optimize wellbore productivity; production technology solutions to maximize production rates; and environmental solutions that manages waste volumes generated in drilling and production operations. Its Smith Oilfield segment designs, manufactures, and markets drill bits and borehole enlargement tools; and supplies drilling tools and services, tubular, completion services, and other related downhole solutions. The company?s Distribution segment markets pipes, valves, and fittings, as well as mill, safety, and other maintenance products. This segment also provides warehouse management, vendor integration, and inventory management services. Schlumberger Limited was founded in 1927 and is based in Houston, Texas.
Advisors' Opinion:- [By Dr. Kent Moors]
That's why some of the biggest OFS providers - like Schlumberger (NYSE: SLB), Halliburton (NYSE: HAL) and Weatherford International (NYSE: WFT) - have been buying up oil and gas equipment companies.
- [By Tony Daltorio]
The biggest oilfield service companies should get a big lift from the boom, Moors said. That includes Schlumberger Ltd. (NYSE: SLB), Halliburton Co. (NYSE: HAL), Weatherford International Ltd. (NYSE: WFT), and Baker Hughes Inc. (NYSE: BHI).
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