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Warren Buffett is a Wall Street icon for a reason: he has set a record that few people can match. So, try to understand what he's doing and why that makes a lot of sense. If you are a fan of Warren Buffett, you should get to know Markel Corporation (NYSE: MKL), a company that has similarities with Buffett's own insurance company, Walmart Inc. (NYSE: WMT), a Buffett stake that is making good progress on the Internet, and Seritage growth properties (NYSE: SRG), an owner who receives help from Buffett in the face of short-term headwinds. Three contributors to Motley Fool provide a quick overview of each.
Double LED
Keith Speights (Markel Corporation): How would Warren Buffett describe his favorite actions? He would probably say that it generates good cash flow through strong insurance and reinsurance activities. The legendary investor would probably notice that he uses these cash flows to buy businesses and stocks from other sectors. And he would almost certainly point out the company's strong management team.
Source of the image: Getty Images.
These characteristics clearly describe Berkshire Hathaway (NYSE: BRK-A) (NYSE: BRK-B), which is obviously Buffett's favorite stock. But they also match a T. Looking at Berkshire and Markel side by side, it's almost as if one sees double. But there are some key differences.
On the one hand, Markel is much smaller than Berkshire – about 1/30 the size of the Buffett company. Markel also focuses on insurance and reinsurance for specialized niche markets that many other insurers ignore. And when it comes to building his investment portfolio, Markel does not hesitate to invest in high-growth technology stocks. Buffett has easily admitted to having made mistakes in the past by not buying several high performing technology stocks.
Markel's share price has more than doubled over the last five years, outperforming Berkshire. The company's core business appears to be in a strong position to continue to give Markel a lot of money to reinvest, further fueling growth. Buffett may not have Markel yet, but his fans will probably appreciate this little Berkshire clone.
I still believe in Walmart
Brian Stoffel (Walmart Inc.): I always have trouble identifying a good stock "Warren Buffett". This is because there is absolutely no overlap between the shares he owns and those in my portfolio. Knowing this, I'm calling on the same company as last month for this task: Walmart.
Investors need to be aware of a few moving elements when they consult the company from 30,000 feet. First, his acquisition of Jet.com two years ago was a major asset for the improvement of his ecommerce game. By the end of 2018, the company will likely consider a 40% growth in the division.
The second important factor is the investment in Flipkart – a major player in e-commerce in India. In the short term, investors will suffer a little: shareholders will probably miss $ 0.85 per share in profits between 2018 and 2019. This is not good.
But Buffett likes to remember that the long run is all that matters. And investors should take to heart the opportunities in which Walmart invests. E-commerce in India is expected to grow from $ 27 billion today to $ 73 billion by 2022. With significant participation in the country's leader, Walmart has a good chance of a disproportionate share of that. cake – which will have positive effects for investors in the next 5 to 10 years.
Good news and bad news
Reuben Gregg Brewer (growth properties of Seritage): If you were the owner and the Sears and Kmart stores accounted for about 40% of your income, you would panic for the moment. Indeed, Sears Holdings recently declared bankruptcy. This is exactly the position in which Seritage is today.
SRG data by YCharts.
But this is not a surprise. Sears Holdings created a real estate investment trust or REIT a few years ago for the sole purpose of raising funds to help the troubled retailer. Meanwhile, Seritage began reducing exposure to Sears and Kmart as soon as it was released. Warren Buffett liked the proposal to replace these distressed retailers, paying lower rents than those of the market, by new tenants at higher rates, to the point that he bought shares of Seritage for his personal wallet. The rent increase is also considerable, with Sears Holdings paying about $ 4 per square foot and new leases last quarter inked at about $ 17.
That said, Sears brands are still an important part of the front line. That's why it's so interesting that Seritage has recently signed an agreement with Berkshire Hathaway, of Buffett, allowing it to access cash of up to $ 2 billion. Basically, Seritage was preparing for the bankruptcy of Sears Holdings, aligning the cash needed to continue upgrading its older properties, a process that can take up to two years. In the short term, Seritage will face headwinds due to the bankruptcy of Sears, but the long-term story that has attracted Buffett to capital has not changed.
Brian Stoffel has no position in the mentioned actions. Keith Speights does not own any of the shares mentioned. Reuben Gregg Brewer has no position in any of the mentioned actions. Motley Fool owns shares and recommends Berkshire Hathaway (B shares) and Markel. Motley Fool has a disclosure policy.
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