Buffett’s Biggest Upside Stocks, Summer 2010 (BRK-A, AXP, BAC, CMCSA, XOM, GCI, GE, IRM, MCO, SNY, WFC, WLP)

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Warren Buffett does not have the same time frame as most investors.  How many of you buy with a “forever” outlook?  Buffett says he likes that term, short of whether he sees fundamental changes that wreck the forever thesis.  Berkshire Hathaway Inc. (NYSE: BRK-A) disclosed its latest full public equity portfolio a week ago and we wanted to see which stocks were in the top ten list of his picks with the largest upside potential now that the markets are  in turmoil.  The stocks which made the screen are American Express Company (NYSE: AXP), Bank of America Corporation (NYSE: BAC), Comcast Corporation (NASDAQ: CMCSA), Exxon Mobil Corporation (NYSE: XOM), Gannett Co. (NYSE: GCI), General Electric Co. (NYSE: GE), Iron Mountain Inc. (NYSE: IRM), Moody’s Corp. (NYSE: MCO), Sanofi-Aventis SA (NYSE: SNY), and Wells Fargo & Company (NYSE: WFC).

For starters, this is the largest upside to the average (mean) analyst target measured by Thomson Reuters.  Unlike the list at the start of 2010, the new hurdle was had more than 30% implied upside versus  under 20% at the start of the year.  The explanation for that is that analysts moved up the price targets of the stocks and now many of the stocks have sold off from highs with the market.

So we have included the closing price  on Monday, the consensus price target, that expected gain, a 52-week trading range, and we have even included the percentage that each stock has sold off from its 52-week high.  Lastly, we have  some color, background, and even some caveats where applicable.

American Express Company (NYSE: AXP) at $39.04 has a target of $50.58, with an implied upside of 29.9% and its 52-week range is $22.00 to $49.19.

  • Now that financial stocks have pulled back and now that the credit card metrics are stabilized, this one is looking at least interesting.  If we double-dip into recession, those analyst price targets are likely to come plummeting down on Amex and this stock will feel like going from first class to standby on coach.

Bank of America Corporation (NYSE: BAC) at $15.40 has a target of $22.79, with an implied upside of 47.9% and its 52-week range is $10.57 to $19.86.

  • BofA is a repeat stock on the ‘most upside stocks’ from the Buffett holdings.  The current financial reform regulation also poses a significant risk to that potential upside of nearly 50%. In fact, that puts this stock in no man’s land.  Maybe it is even a double no man’s land if suddenly that 10% of the US deposit cap argument comes back up in D.C.  Still, BofA is a turnaround story even if it is turned into a utility.  The $22.79 target is up from a $21.40 target back in early April before the last earnings season and the latest sell-off.

Comcast Corporation (NASDAQ: CMCSA) at $16.77 has a target of $21.46, with an implied upside of 27.9% and its 52-week range is $13.04 to $20.56.

  • Historically it seems as though Buffett would have shied away from an industry that still operates on an EBITDA basis.  Not the case now.  The cable operator, and soon-to-be media network operator via the NBC-GE acquisition, pays a 2.2% dividend yield and the near-30% upside is not out of the realm of possibility even if Europe goes into the depths of Euro and Dollar parity.