An iconic brand, the company is experiencing a hiccup (pun intended) in emerging markets like India and China. Brazil also disappointed, but that country’s tough financial situation has been mentioned in several companies’ earnings calls. Still, The Coca-Cola Company (NYSE:KO), maker of still and sparking beverages, dominates over 40% of the North American soda space, though it’s a space that is seeing continuing yearly declines. It has an 18.42 forward P/E and a yield of 2.70%.
Famously skirting the dot.com boom (and bust) with his well-known aversion to tech, Buffett is very familiar with International Business Machines Corp. (NYSE:IBM). IBM, the global provider of IT products and services, fits the Buffett formula of global reach, time-tested business model and management, and competitive advantages. It’s Buffett’s third largest position at 17.1%.
International Business Machines Corp. (NYSE:IBM) has pulled back from 52-week highs after a disappointing Q2 earnings release on July 17, reporting a 13% drop in diluted EPS to $2.91 and a 17% slide in net income to $3.2 billion. However, the company’s gross profit margin increased by 1.0 point to 48.7% and generated free cash flow of $2.7 billion.
The most interesting tidbit was that cloud computing revenue was up a stunning 70%! International Business Machines Corp. (NYSE:IBM) has a 13.75 trailing P/E and 1.90% yield with the PEG at 1.08.
Wells Fargo & Co (NYSE:WFC) is Buffett’s main financial position at 19.9%, and it has rallied along with the US housing market. Fundamentally more of a bargain than IBM, its trailing P/E is 12.05 with a 2.70% yield. However, with Wells Fargo’s PEG at 1.69, International Business Machines Corp. (NYSE:IBM) will grow faster. But Wells Fargo & Co (NYSE:WFC) isn’t mired in the US, announcing its intent to buy Eurohypo UK, a European retail lending operation for $6 billion, to expand overseas operations.
Wells Fargo reported earnings on July 12, beating on both top and bottom lines, reporting $0.98 EPS and $21.38 billion in revenue. However, they also reported a disturbing trend lower in mortgage originations in the US. Wells Fargo & Co (NYSE:WFC) controls almost a quarter of US home mortgage originations, and signaled they could decline further.
Fearful or greedy?
International Business Machines Corp. (NYSE:IBM) sold off after its latest release and greedily buying the dip is a good idea considering its low P/E and yield. The Coca-Cola Company (NYSE:KO) is less favored, as soda consumption trends just can’t be turned around. Wells Fargo & Co (NYSE:WFC) is the least favored, as it is the most exposed US bank to home financing and a name to be fearful of. Or just buy Berkshire Hathaway Inc. (NYSE:BRK.A) and go about your merry way.
The article Why Warren Bufffett Will Always Outperform You originally appeared on Fool.com and is written by AnnaLisa Kraft.
AnnaLisa Kraft has no position in any stocks mentioned. The Motley Fool recommends Berkshire Hathaway, Coca-Cola, and Wells Fargo. The Motley Fool owns shares of Berkshire Hathaway, International Business Machines, and Wells Fargo. AnnaLisa is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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