Warren Buffett is undoubtedly one of the world’s greatest investors and he didn’t get where he is today by making bets on the success of highly speculative mining companies.
Buffett only invests in the best companies, which have wide moats, a reliable income stream, intelligent management and a history of success. A strong brand is also important to Buffett, as without that, the company in question will struggle to rise above the competition.Â
Finding Buffett-esque companies is difficult and requires plenty of research. There are a few businesses that meet all of his criteria. Vodafone (LSE: VOD) is one such company.
Reliable incomeÂ
Vodafone has a huge moat in its European, South African and Indian telecoms network. It would cost tens or possibly even hundreds of billions of pounds to replicate the company’s existing infrastructure. Additionally, it’s a strong brand that’s internationally recognised. That being said, Vodafone’s market share is under attack in some regions, and while the company is now fighting back, the outlook is no longer as bright as it once was.
Still, Vodafone’s wide moat means that the company is a perfect income investment, the sort of investment that Warren Buffett might buy. The company’s shares currently support a dividend yield of 5.3%, and the payout is expected to rise in line with inflation for the next few years.
Prized assetsÂ
ITV (LSE: ITV) is a company that could fit quite comfortably into Warren Buffett’s equity portfolio. ITV has a leading market share in the UK’s television market. What’s more, the company is branching out into online content and has built a vast content library, which can be sold to various other networks around the world. This library is one of ITV’s most prized assets and should continue to generate a steady income stream for the company going forward.
ITV’s growth since 2011 has been nothing short of outstanding. If the company meets City forecasts for growth for the next two years, by the end of 2017 ITV’s pre-tax profit will have tripled in seven years. Off the back of this growth, the company’s shares have gained around 200% since the beginning of 2011 and ITV continues to return excess cash to shareholders via special dividends. The company’s shares currently trade at a forward P/E of 13.3 and support a regular dividend yield of 3.1%.
Growth in a competitive marketÂ
Sky (LSE: SKY) is one of the most recognisable brands in the UK and Europe. The company has shown its resilience and strong relationship with customers over the past few years as competitors such as Netflix, Amazon, BT and other content streaming providers have all started to nibble away at the company’s market share.
However, despite this competition, Sky’s pre-tax profits are up around 50% since 2011 and City analysts are forecasting a further 11% growth in EPS this year. Sky’s shares currently trade at a forward P/E of 16.2 and support a dividend yield of 3.4%.