58 KIPLINGER’S PERSONAL FINANCE^ 05/2019INVESTINGMOST PEOPLE WANT TO INVEST
like Warren Buffett, the
wealthiest man in Omaha,
Neb., and 99.9% of the sur-
rounding universe. That’s
why they f lock to Berkshire
Hathaway’s annual meeting
in May of each year, hoping
to glean some wisdom from
Berkshire’s CEO.
Buffett’s $82.5 billion
estimated net worth makes
him the world’s third-
wealthiest man, behind
Microsoft’s Bill Gates and
Amazon’s Jeff Bezos. Unlike
Gates and Bezos, however,
Buffett’s fortune came from
investing in other compa-
nies. Since Buffett took con-
trol of Berkshire Hathaway
in 1964, the price of Berk-
shire’s A shares has in-
creased at an annualized
rate of 20.5%, compared
with 18.7% for Standard &
Poor’s 500-stock index.
Like most wildly success-
ful investors, Buffett makes
it sound easy: Buy quality
companies with great busi-
nesses, and try to buy low
when the opportunity
arises. Invest for the long
term. Those rules—and a
canny eye for opportunity—
have led Berkshire to stocks
as diverse as Apple, Coca-
Cola, Costco and Visa.
Most stocks, even the
ones Buffett loves, aren’t
cheap. “Prices are sky-highInvest Like Buffett
These companies have the hallmarks that Warren would love.
BY JOHN WAGGONERHIGH-QUALITY STOCKSfor businesses possessing
decent long-term pros-
pects,” Buffett said in his
2018 shareholder letter. T he
eight stocks below embody
virtues that Buffett loves.
Not all are bargains, but all
are high-quality stocks with
rock-solid balance sheets,
strong competitive advan-
tages, prodigious cash gen-
eration or the power to raise
prices, even in tough times.
(Share prices and other data
are as of March 15.)BRAWNY
BALANCE SHEETS
Buffett loves a company
with lots of cash and little
debt, which means it can
see its way through tough
times and even snap up ri-
vals at bargain prices when
the economy turns south.
Mutual fund company
T. ROWE PRICE (SYMBOL TROW,
$102) boasts a balance sheet
with no debt. Zero. Zip.
Nada. At the end of 2018,
the company had $3.02 bil-
lion in cash and discretion-
ary investments (money
invested in its own funds),
up from $2.7 billion a year
earlier. The stock yields a
hefty 3.0%.
T. Rowe, like other fund
companies, is feeling the
pressure to lower its fees—
good for investors but chal-
lenging for the bottom line.Analysts expect a 6.5% in-
crease in earnings per share
from 2019 to 2020. Market
downdrafts can put a dent
in the value of assets under
management, as happened
in the fourth-quarter 2018
downturn. Nevertheless,
the company generated a
13% increase in advisory
fees in 2018. And analysts
at research firm CFRA
estimate that two-thirds
of T. Rowe’s assets are in
retirement accounts, which
tend to stay in one place.
Milwaukee-headquar-
tered A.O. SMITH (AOS, $51)
makes water heaters for
customers around the
world. The company had
$221.4 million in long-term
debt at the end of 2018.
That’s down from $410.4
million a year earlier, and
less as a percentage of
shareholders’ equity than
the average for companies in
similar businesses and the
companies in the S&P 500.
Management expects
sales to increase 1% to 2.5%
in 2019, a cautious outlook
that ref lects a slowdown
in China, the firm’s largest
market outside of the U.S.
Wall Street shared the com-
pany’s caution and knocked
the share price down 29.1%
in 2018, although it has re-
covered some since.
The firm can be a wise■ THE POWERFUL
WALT DISNEY BRAND
GIVES THE COMPANY
A MOAT T H AT ’ S
WORTHY OF ONE
OF ITS THEME-PARK
CASTLES.ISTOCKP
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