Legendary investor Warren Buffett has made billions through stock investing over the decades. And he’s done it through his Berkshire Hathaway Inc investment firm by predominantly buying US shares.
The Omaha native has never ventured too far into overseas markets to find top shares to buy. Perhaps his most famous foreign investment was in 2012 when he loaded up on Tesco stock before the share price collapsed.
The billionaire investor later told CNBC that his dalliance with Tesco was “a huge mistake.” It ended up costing Berkshire Hathaway $444m and came as is cited as one of Mr Buffett’s biggest errors.
Buying UK shares
Today Warren Buffett is happy to stick to US shares. And there’s perhaps no reason for him to change formula give the massive success he’s enjoyed since the 1960s.
But this doesn’t mean, of course, that UK shares don’t offer brilliant investment potential. One reason why he may largely avoid overseas equities is simply because he’s more familiar with those Stateside, allowing him to make a more confident investing decision.
There are, in fact, many UK stocks that share qualities with some of the New York-listed companies that Warren Buffett owns. I’ll come to three of my favourites shortly.
Battle of the brands
When you hear Mr Buffett explaining his success he spends a lot of time talking about ‘economic moats’. These are, simply put, advantages that a company has over the competition. They can be critical in helping a business to grow profits over the long term.
Brand power is one economic moat that the billionaire investor loves. As such Berkshire Hathaway holds stocks in a variety of food, beverage and household goods giants like Coca-Cola, Kraft Heinz and Procter & Gamble.
This cluster of companies make ultra-popular products like Coke soft drinks, Heinz ketchup, Ariel detergent and Gillette razors. Sales volumes of these products remain strong during economic upturns and downturns. And they sell in massive volumes even when they rise in price.
3 Buffett-like FTSE 100 shares
Now, Warren Buffett might not own any of these FTSE 100 stocks. But they benefit from the same formidable economic moat that those US stocks mentioned above carry.
Drinks business Coca-Coca Hellenic Bottling Company — a stock in which Coca-Cola holds a 20%+ stake — is one. Sales here benefit from the brand strength of the products it manufactures and sells across Europe and Africa.
Unilever boasts a bulging stable of popular global brands too, like Hellmann’s mayonnaise, Magnum ice cream and Dove soap. Unilever is a share that Kraft Heinz, encouraged by Warren Buffett, actually tried to take over several years ago.
Then there’s Reckitt. This FTSE 100 stock manufactures both healthcare products and household goods and its labels include Nurofen painkillers, Durex contraceptives and Dettol disinfectants.
I don’t think investors need to buy US stocks to make big money like Warren Buffett. By adopting some of his key investing principles it’s possible to create wealth with UK shares too.