Billionaire investor Warren Buffett made his fortune by building a portfolio dominated by US shares.
The Berkshire Hathaway boss has only made small investments in overseas stock markets during his long career. But that doesn’t mean he thinks that stocks listed outside Wall Street are bad investments.
Here are several top FTSE 100 shares I think he’d love.
Brand giants
First of all, Warren Buffett is a huge fan of stocks that have robust ‘economic moats’.
Simply put, these are advantages that businesses have over the competition. And they can allow a company to continue growing profits even during bad economic times by growing market share.
Buffett loves shares of companies whose products have market-leading brand power, for example. Examples of businesses he owns include Coca-Cola, Cadbury and Oreo owner Mondelez International, and go-to online retailer Amazon.
The terrific customer loyalty that their brands provide allow them to raise prices while still enjoying high volumes. This enables them to effectively defend or increase profit margins.
A FTSE 100 stock Buffett bought!
In previous decades, the Sage of Omaha also held shares in FTSE 100 business Diageo. He was no doubt attracted to the company’s own portfolio of market-leading products. These include Guinness stout, Smirnoff vodka, and Captain Morgan rum, labels that are as popular today as they were back then.
Other blue-chip shares I think Warren Buffett might like are Associated British Foods and British American Tobacco. The former owns the popular Primark fast fashion chain and high-volume food brands like Silver Spoon sugar and Twinings tea. British American Tobacco manufactures cigarettes under the popular Lucky Strike and Camel labels.
Economic moats come in other forms, too. Take housebuilder Persimmon, for example, which manufactures its own tiles, bricks, and timber products.
This advantage allows Persimmon to have a greater control of costs. This in turn can help it offer its homes at more attractive prices than the competition.
The simple things
Those four FTSE 100 shares have another quality that Warren Buffett treasures. Their businesses are easy to understand.
The legendary investor has made mistakes of his own down the years. His disastrous purchase of Tesco shares a decade ago was one of them. But having a clear indication of what a stock does clearly reduces risk for investors.
Oil producer BP is another big cap share that’s easy to understand. It operates in the same sector as Chevron, a US share that Buffett currently owns. Mining business Rio Tinto and retailer Next are a couple of other FTSE 100 stocks with simple-to-grasp operations.
Bargain hunt
Finally, Warren Buffett loves shares that look exceptionally cheap. In fact the Berkshire Hathaway boss has made his fortune on the back of intelligent value investing.
I also love to shop for bargains. And the good thing for me is that stock market volatility in 2022 leaves many stocks looking undervalued.
Take banking giant HSBC and packaging manufacturer Mondi. Both of these shares trade on price-to-earnings (P/E) ratios of below 10 times.
Buffett likes to focus on ‘intrinsic value’ when looking at value for money. I think the FTSE 100’s slump in 2022 leaves plenty of top stocks looking cheap in a variety of ways.