Investing lessons from Warren Buffett’s UK buys

Warren Buffett’s investment in Northern Powergrid is a good indication of what investors can buy.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Ace investor Warren Buffett’s selection criteria serve as great investment guidelines, even if his UK investments haven’t always gone well. He famously said that investing in FTSE 100 retailer Tesco was a “huge mistake” a few years ago.

It might have been one for him, but for us, it’s an education from the Oracle of Omaha’s experience that can steer us towards steadier investments.

One example is his successful investment in the profit-making Northern Powergrid, which provides electricity in North East England, Yorkshire, and Lincolnshire. It isn’t publicly, listed making it out-of-bounds for retail investors, but I believe utility companies in the FTSE 100 universe can offer similar investing opportunities.

Should you invest £1,000 in Tesco right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Tesco made the list?

See the 6 stocks

Value for money

A case in point is United Utilities (LSE: UU), which supplies water in North West England and also produces renewable energy. It meets a number of Buffett favoured criteria – growing business as seen in terms of revenue and the capacity to make profits consistently.

It’s also secure from macroeconomic vagaries, being a defensive share and has a far lower price-to-earnings ratio (P/E) of 16.3 times than other FTSE 100 defensives like the pharmaceutical giant AstraZeneca. And this is when it’s trading at one-year highs. This ticks another Buffett criterion, which is value for money.

I’m inclined to believe that he wouldn’t be comfortable with the company’s rising debt as flagged in the latest trading update. On the whole, UU remains a share worth considering at the very least.

Impressive price performance

Another utility company I have long liked is Northern Grid (LSE: NG), which has had a pretty good run at the stock markets in 2019 so far. This is the third time I am re-visiting this share, and each time its price has inched up more. From the first time I wrote about six months ago up to the last close, its price is up over 13% and even from the last time, two weeks ago, it’s up 1.4%.

Like UU, its revenue is predictable compared to cyclical businesses and it’s a profit-making entity as well. Despite being a healthy company with rising share price, it also has a relatively affordable P/E of 20 times, making it, I believe, a Buffett-worthy share to invest in.

Both UU and NG run the risk of potential nationalisation if Labour comes into power. With a general election an imminent possibility in the next month, this may well be a real occurrence in the future.

But if I’ve learnt anything from the Brexit process so far, it’s that the best assumption is that nothing will change, otherwise we risk missing out on quality shares.

But this isn’t the only opportunity that’s caught my attention this week. Here are:

5 Shares for the Future of Energy

Investors who don’t own energy shares need to see this now.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.

While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.

Open this new report5 Shares for the Future of Energy — and discover:

  • Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
  • How to potentially get paid by the weather
  • Electric Vehicles’ secret backdoor opportunity
  • One dead simple stock for the new nuclear boom

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

Is now a good time to start investing in the stock market?

Predicting what the stock market will do in the next few weeks and months is nearly impossible. But over the…

Read more »

Close-up as a woman counts out modern British banknotes.
Investing Articles

£5,000 invested in Legal & General shares 10 years ago would have generated passive income of…

Legal & General shares are one of the highest-yielding in the FTSE 100. How much passive income could have been…

Read more »

Passive income text with pin graph chart on business table
Dividend Shares

3 world-class dividend stocks to consider for passive income

These three stocks could potentially help investors create a stable – and growing – stream of passive income in the…

Read more »

Group of young friends toasting each other with beers in a pub
Investing Articles

Diageo’s share price plunges 43% in 2 years! Time to consider buying the dip?

With sales falling, the Diageo share price is being hit hard. But with the shares now trading near 52-week lows,…

Read more »

Night Takeoff Of The American Space Shuttle
Investing Articles

The GGP share price skyrockets 100%+ in 2025 – Could this be the breakout stock of the year?

With the GGP share price more than doubling in four months, can Greatland Gold continue to thrive throughout the rest…

Read more »

Illustration of flames over a black background
Investing Articles

JD Sports’ share price soars 27% in just 3 weeks – is this the hottest stock to consider buying now?

The JD Sports share price is rising rapidly as management steers the business back on track. Can this upward momentum…

Read more »

Nottingham Giltbrook Exterior
Investing Articles

The Marks and Spencer share price stumbles on a cyberattack! Is it time to panic?

A disruptive cybersecurity breach has brought down Marks & Spencer’s online store, sending the share price tumbling. Should investors be…

Read more »

piggy bank, searching with binoculars
Investing Articles

Down 32%, this FTSE stock now has a 12% dividend yield!

With one of the highest yields in the FTSE 350, is this emerging markets investment firm a screaming passive income…

Read more »