25: Mondelez International Inc (NASDAQ:MDLZ)
Percent of Warren Buffett’s Portfolio: 0.01%
Dividend Yield: 1.5% Forward P/E Ratio: 24.1x (as of 5/16/16)
Sector: Consumer Staples Industry: Miscellaneous Food
Dividend Growth Streak: 2 years
Kraft Foods spun off Mondelez International Inc (NASDAQ:MDLZ) in October 2012. Mondelez is a giant food company focused primarily on snack products (85% of sales). The company owns iconic brands such as Oreos, Ritz, Chips Ahoy, Cadbury, and Trident.
By geography, Mondelez generates 63% of its revenue in developed markets and 37% in emerging markets.
Berkshire Hathaway’s small position in Mondelez dates back to late 2012 when Kraft Foods completed its spin-off of the company through a stock distribution.
Warren Buffett was an existing Kraft Foods shareholder and therefore received shares of Mondelez.
Given Berkshire Hathaway’s stake in Kraft Heinz, we know that Buffett likes this type of business. It’s simple to understand, sells essential products, owns a portfolio of strong brands, and generates highly predictable cash flows.
The global snacking market also offers plenty of room for growth. The company estimates its size at $1.2 trillion and expects growth to be driven by rising consumption in emerging markets.
With number one global market share positions in biscuits, candy, and chocolate, Mondelez should benefit over time as consumption grows.
While Mondelez International Inc (NASDAQ:MDLZ) is far from an exciting business, Warren Buffett’s “slow and steady” investment strategy has been a good one.
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26: Restaurant Brands International Inc (NYSE:QSR)
Percent of Warren Buffett’s Portfolio: 0.3%
Dividend Yield: 1.5% Forward P/E Ratio: 27.7x (as of 5/16/16)
Sector: Consumer Discretionary Industry: Food & Restaurants
Dividend Growth Streak: 0 years
Restaurant Brands International Inc (NYSE:QSR) is the parent company of Burger King and Tim Hortons, which combined in 2014 to claim the title of the world’s third-largest fast food business with over 19,000 restaurants.
Burger King is the second-largest fast foot hamburger chain in the world and serves more than 11 million customers every day.
Tim Hortons was founded in 1964 and is the largest quick service restaurant chain in Canada. The restaurant specializes in coffee, baked goods (e.g. doughnuts), and home-style lunches.
Berkshire Hathaway’s stake in Restaurant Brands International Inc (NYSE:QSR) arose from Warren Buffett’s involvement with the merger between Burger King and Tim Hortons, which granted him warrants to buy stock in the combined business.
Berkshire Hathaway also owns $3 billion of preferred shares in the company, which pay him a high-yield dividend of 9% each year.
The consumer sector is home to many famous brands and has historically been one of Warren Buffett’s favorite places to pick stocks.
Burger King and Tim Hortons are two of the most well-known restaurant brands in the United States and Canada.
Importantly, both businesses seem to have plenty of potential for international growth. Burger King is already in more than 100 different countries, and Tim Hortons has little presence outside of Canada.
The company’s global scale, brand recognition, and prominent locations make it a free cash flow machine that should enjoy steady growth over the long term.
