With the stock markets taking a major beating recently, there are significant discounts on some popular Warren Buffet investments.
Many top-quality companies that have great financials and wide economic moats have seen their stock prices drop in line with the rest of the market as of late. The coronavirus pandemic has caused mass disruption for most industries, but now is a good time for investors to take advantage of these bargain prices.
One of the big anticipated changes to come from the coronavirus pandemic is the move away from using cash. When people go to the stores to get vital supplies, they are being told to not use cash as this can spread the virus.
With people otherwise staying in their homes for most of the day, they are also becoming more reliant on using e-commerce options. For example, there has been a massive uptick in people ordering groceries or cooked meals online. Grocery delivery app Instacart has seen a 218% rise in daily downloads during this period.
Naturally, cards are being used to conduct these transactions. While retail was already struggling with the explosion in popularity of e-commerce, the coronavirus pandemic is only going to accelerate this transition even further. Visa (NYSE: V) is now trading on a discount after dropping by more than 37% from 52-week highs. Its price has recovered somewhat since then but there is still upside potential. As a market leader (60% share of debit/credit card market) with a wide economic moat, it is a no-brainer investment at the moment.
Coca-Cola (NYSE: KO) is another Warren Buffet staple, with Berkshire Hathaway (NYSE: BRK.A) owning about 10% of the company. As one of the strongest brands in the world and having survived countless recessions since the company was founded in 1892, Coca-Cola isn’t going anywhere.
While supply chains have been affected during the pandemic, there has been “explosive growth” in grocery sales of the company’s products. Coke has a strong balance sheet, with cash reserves of more than $11 billion and it will be well able to absorb the drop in earnings that will be seen as a result of the pandemic.
In recent years, the company has managed to grow its net income margin seven times over, which is highly impressive. In 2017, net income was only $1.2 billion, with the 2019 figure being $8.9 billion which showcases the improvements the company has been making in its business.
Perhaps the standout aspect of investing in Coca-Cola at its current price is the impressive dividend yield. For one of the most defensive companies out there, the dividend yield of about 3.50% is too good to be ignored.
3. Sirius XM
The coronavirus pandemic unsurprisingly has put strains on Sirius XM (NASDAQ: SIRI). A large portion of its audience is daily commuters, particularly those driving to work. With the ongoing lockdown, people are staying at home and not using their vehicles.
New car sales are a significant driver of growth in subscribers for the company also, with car sales down significantly. Nissan, for example, saw a drop of almost 30% in US car sales for Q1. With an economic downturn on the horizon, car sales figures aren’t likely to improve any time soon.
Despite these issues, it does not appear that the situation will be as bad as the company’s stock price decline suggests. Cancellations are not likely to be too extensive, with hopes that people will be back to normal in a couple of months. The company also has enough cash (free cash flow of almost $1.7 billion) to weather out the storm.
It has been strongly performing over the past year, with a 7% increase in revenue in 2019 up to a record $6.2 billion. It also saw its total subscribers increase by 3% and average revenue per user rose by 4%.
It has also been diversifying in different areas, such as music streaming after its $3.5 billion purchase of Pandora and its investment in SoundCloud. With the stock trading at a significant discount, there appears to be enough upside and margin of safety to make an investment.
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.