Fiserv, Inc. (NASDAQ: FISV) is an investment which we found confusing. It may be that the Buffett portfolio management team had a difficult time with the investment as well. Berkshire Hathaway cut its stake to 3.91+ million shares last quarter after having taken this position just a quarter before at 4.4 million shares. After closing at $57.51, its consensus price target a year out is $58.36 and that implies an
upside of just under 1.5%. Its 52-week trading range is $44.80 to $58.30. With no past dividend and such a modest return likely Buffett may have changed his mind on the information management and electronic commerce systems and services company.
Nalco Holding Company (NYSE: NLC) is another stock which has an extremely modest upside. At $31.15 on Monday, that is a mere 2.2% below the consensus target of $31.83. What makes this investment so limited is that shares have risen more than 50% from the lows of the summer. The stock just a hit a 52-week of $31.24 on Monday. Nalco is a water and chemicals firm that services many industries which run the gamut from water to paper to energy. It benefited from the BP plc (NYSE: BP) oil spill this year. Buffett trimmed his stake last quarter to 6.14 million shares from 9.15 million shares It is hard to say anything other than it is fully valued. The dividend is only 0.5%.
Torchmark Corporation (NYSE: TMK) is not an exciting company for most investors. It sells life and supplemental health insurance and annuities. Buffett has a long-term love affair with insurance products. At $60.89, the implied upside is only about 2.8% to the consensus price target of $62.62. A problem may be that it just hit a 52-week high of $61.40 on Monday. It is up almost 50% from the year’s low and it peaked just under $70 in 2007. The yield won’t appeal to many. At only 1.1% it is lower than many insurance peers. Torchmark is a rather small holding Buffett at just over 2.8 million shares.
The old US Gypsum, now USG Corporation (NYSE: USG), is a position that in which Buffett probably ignores outside valuation opinions. He amassed a larger position higher in the capital structure than just the common stock. The firm is one of his housing and construction investments. At $14.31, the sheetrock giant has a 52-week range of $11.21 to $25.59 but has only 2.2% implied upside to the consensus price target of $14.63. As Buffett got much more control of USG in early 2009, it is obvious he is taking the real long outlook and Berkshire may hold the stock after the Oracle of Omaha is gone.
Even though these stocks are fully valued, Buffett is unlikely to care. He has cut his position in several this year while other have been outstanding performers. The reader can see the full Berkshire Hathaway portfolio of Buffett’s public holdings here. An here is Buffett’s top ten implied upside investments for 2011 to review as well.
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JON C. OGG
