Stock market

Warren Buffett should buy this flagging FTSE 100 firm!

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What fun it is to be Warren Buffett, the famous American investor, billionaire, and philanthropist. The ‘Oracle of Omaha’ spent his entire life doing what he loved, amassing a personal fortune of $131.7 billion.

Buffett will turn 94 on August 30, but he is remarkable for his age. However, the death of his right-hand man Charlie Munger in November 2023 at the age of 99 may have shaken Warren.

Long travel life

‘Uncle Warren’ started investing in 1942 at the age of 11, investing his savings in three shares of an American business. And even after 82 years, he has not lost his glowing enthusiasm for capitalism.

Today, Warren Buffett is chairman and CEO. Berkshire HathawayIn which he and Monger grew to a combined $861bn. (Disclosure: My wife and I own Berkshire B stock.) Buffett has also donated more than $50 billion to good causes and plans to give away 99% of his entire fortune during his lifetime or upon his death. have

Therefore, Buffett is one of my personal heroes, along with physicists Richard Feynman and Stephen Hawking, mathematicians Johann Carl Friedrich Gauss and Srinivasa Ramanujan, and computer scientist Alan Turing.

Buffett has a problem.

Right now, Warren has a big — but welcome — problem. Berkshire Hathaway is so massively profitable, it’s sitting on a record cash pile of $168bn. Buffett has admitted that with the U.S. stock market trading high, he’s struggling to put that cash to work.

Of course, no one but Buffett knows what he’s thinking about Berkshire’s cash pile. But I’ve learned from reading his wisdom that, ideally, he does what he likes.The holding period is forever“And he likes it.”Buy great businesses at reasonable prices.

For many years, I have argued that the UK FTSE 100 The index was very low and many of its constituent shares were undervalued. Thus, my advice to Warren Buffett is simple: Why not buy big? outside Of your country?

What can Warren buy?

So, my suggestion to the world’s biggest investor would be: why not make a bid to buy Global Beverages? Diageo (LSE: DGE) ? (Another disclosure: my wife and I also own shares in Diageo.)

Buffett wants acquisitions that ‘move the needle’ by delivering strong earnings and cash flow to Berkshire and its shareholders. Diageo certainly fits that bill. At the current share price of 2,723p, the firm is worth £60.4bn, making it #9 by market value on Footsy.

Diageo shares have weakened in recent years, falling 25% in the past 12 months and losing 15.1% of their value over five years. Moreover, they are 26.3% below their 52-week high of 3,694.5p set on 5 May 2023, and only 1.8% above their low of 2,676p hit on 23 January. (excluding cash dividends).

To be sure, Diageo has a few short-term problems, particularly with shrinking sales in the Caribbean and Latin America. In addition, people under 25 are drinking less than their older peers, which is partly due to the legalization of cannabis in various states and countries.

That said, if I had more than £60bn, I’d love to own this century-old business. Perhaps Warren Buffett – a fellow value investor – might one day reach the same conclusion? However, I won’t hold my breath!

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