2 FTSE 100 shares I think Warren Buffett would buy

Warren Buffett has been previously associated with these FTSE 100 shares, which suggests he could revisit the ideas says Rupert Hargreaves.

| 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.

Warren Buffett is seen as the world’s greatest investor. Over decades, Buffett, or the Oracle of Omaha as he’s known, has acquired a multi-billion dollar fortune by investing in stocks and shares. 

He’s highly selective when picking assets for his portfolio. He can go for years without placing any large deals and spends hours reading up on companies before deciding to buy.

Buffett rarely invests outside of his home market in the United States. However, I believe there are several companies here in the UK’s FTSE 100 that he could appeal to him. 

Warren Buffett-style investments

The two FTSE 100 companies that I believe Warren Buffett might want to buy are Unilever (LSE: ULVR) and Tesco (LSE: TSCO). 

Warren Buffett was once Tesco’s third-largest shareholder. By 2012 he owned 5% of the business. I believe Buffett bought Tesco because he liked the company’s then management. He also likes to own stocks with a strong competitive advantage, which Tesco has as the UK’s largest retailer. 

Unfortunately, following the accounting scandal in 2014, Buffett decided to sell his investment. The investor said he sold because of the company’s accounting problems and a lack of confidence in management. 

close-up photo of investor Warren Buffett

Since then, the company’s management has changed, and the accounting problems have been dealt with. The group still has the qualities it had in 2006, but it’s now in a better financial position. It has reduced borrowings and improved its competitive position with the acquisition of Booker. 

This doesn’t guarantee that the company will uncover no other problems. There may be another accounting scandal lurking on Tesco’s balance sheet. As is the case with any other investment, it’s impossible to predict the future. Tesco also faces other risks such as increased competition, higher wages and additional taxes. 

Still, I believe that if Warren Buffett reviewed the business again today, he might decide to buy back in.

FTSE 100 takeover

Buffett has never owned Unilever, but it was the target of a £115bn bid from Kraft Heinz in 2015. His conglomerate owns around a third of Kraft Heinz. 

Kraft and Unilever have a lot in common. Both companies own portfolios of well-known and valuable consumer brands. The big difference between the two businesses is that one is primarily a US-based enterprise, while Unilever generates more than 50% of its sales in emerging markets. This exposure to fast-growing emerging markets may help Unilever grow faster than some of its peers. I think Unilever also has a lot in common with the likes of Coca-Cola, which has been a staple in Buffett’s portfolio for decades. 

Of course, just because a business with Buffett’s backing has shown interest doesn’t mean the Oracle of Omaha would buy Unilever. Nor does it suggest the stock is a risk-free investment. As with all stocks and shares, Unilever has its own risks such as sluggish growth for its branded products if consumers turn to cheaper alternatives.

Even Warren Buffett loses money. He lost nearly $500m selling Tesco after shares in the group slumped following its accounting scandal. Just because he has expressed an interest in these businesses does not necessarily mean they are going to be good investments. Every investment should be considered in the context of an individual portfolio. 

Nevertheless, I believe that Warren Buffett’s past association with these businesses suggests he could revisit them at some point in future. 

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.

Rupert Hargreaves owns shares in Unilever. The Motley Fool UK has recommended Tesco and Unilever. 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

Fireworks display in the shape of willow at Newcastle, Co. Down , Northern Ireland at Halloween.
Investing Articles

Will the BP share price go gangbusters under President Trump?

The BP share price has had a rough ride lately and Harvey Jones says the FTSE 100 oil giant looks…

Read more »

Satellite on planet background
Investing Articles

Is this the best bargain in the FTSE 250 right now?

This FTSE 250 defence stock is a world leader in testing and evaluation technology for military use and has seen…

Read more »

Fireworks display in the shape of willow at Newcastle, Co. Down , Northern Ireland at Halloween.
Investing Articles

How would I start planning my Stocks and Shares ISA for 2025? With this super-solid growth stock

I can’t think of a better way to prepare for a new year than opening a fresh Stock and Shares…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

Down 26% to just £4, Glencore’s share price looks cheap to me right now

Market pessimism over China’s economic growth has helped push Glencore’s share price down but I think this is overdone, leaving…

Read more »

Number three written on white chat bubble on blue background
Investing Articles

Just released: the 3 best growth-focused stocks to consider buying in November [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

Why now could be the time to get ready for a stock market crash

Both the FTSE 100 and the S&P 500 climbed after the US election results. But Stephen Wright thinks now is…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

A UK share and an ETF that could soar following Trump’s election win

Donald Trump's White House return poses huge uncertainty for the global economy. But this UK share and ETF could gain…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

2 FTSE stocks that demonstrate the best (and worst) of the AIM market

Our writer looks at the performance of two very different FTSE stocks that highlights the pros and cons of investing…

Read more »