• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Doug Kass
    • Bruce Kamich
    • Jim Cramer
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Technology

Would You Want Buffett's Big 4?

Each of them is at a tricky stage.
By JIM CRAMER
May 04, 2015 | 06:45 PM EDT
Stocks quotes in this article: AXP, KO, IBM, WFC, BAC, BRK.A, MA, V, COST, EXPE, PCLN, TRIP, CNQR, SAP, MNST, GMCR, PEP, AAPL

What do we make of the Big Four, the four companies that are the mainstays of Warren Buffett's investment portfolio: American Express (AXP), Coca-Cola (KO), IBM (IBM) and Wells Fargo (WFC)?

First, just as we can't judge a book by its cover, we can't judge this man by his Big Four. It's the regular businesses and their tremendous cash flow that have long eclipsed the power of the Big Four or any of Buffett's stock holdings, which is another reason why I have been adamant that it is not worth following the master in his stock picks, just his company's shares.

Why not? You want them all. You want his investments alongside 3G Capital. You want his preferred position in Bank of America (BAC). You want his wind tax credits and his mass of pipelines with their gigantic cash flow, not to mention an insurance business that, while chided by Buffett as too competitive, at least when it comes to the reinsurance side, still makes up the secret sauce of the so much of Berkshire Hathaway (BRK.A). Of course, you want Burlington Northern, but not as much as you would have at one time, as the rail is a huge transporter of oil. All I can say is better than coal!

So let's deal head on with the Big Four because they are at tricky stages in their existence. First, American Express, I think, has lost its edge. While the brand remains strong, the numbers just don't support the kind of growth that portfolio managers want. It has nowhere near the growth rate of MasterCard (MA) or Visa (V) or the soon-to-be-spun-off PayPal, but it is very cheap, at 14x earnings, vs. its historic growth. Here's the issue, though. The company has become poorly run, relying on cost cuts and partnerships that are faltering. Witness the Costco (COST) debacle, a company that went hand-in-hand for more than 5 cents a share that we didn't even know about until the deal was lost. That's unfathomable.

The recent meeting proved nothing other than that American Express has been left behind by the Web. Where is this company when it comes to the things that Expedia (EXPE) brings to the party? Why didn't it buy Priceline (PCLN) or TripAdvisor (TRIP)? It was a stake holder in the incredibly valuable Concur (CNQR), and it sold its stake when SAP (SAP) bought the company. The bet? New management comes in and catches up. Not a bad bet, but one based solely on hope.

To me, Coca-Cola is intriguing because of the calls it has on the super-growth vehicle that is Monster (MSNT) and the potential home run that another company it has a stake in, Keurig Green Mountain (GMCR), might hit with its cold-drink process. Plus there's the nice 3% yield and the possibility of a peak in the dollar vs. emerging-market currencies as Coca-Cola is hedged vs. the euro and the yen. I do worry that, like American Express, Coca-Cola is an old brand, this time with health consequences attached to it, but if you share Buffett's affinity toward fattening drinks, be my guest.

IBM's a work in progress. It's turning, but I don't know how fast it can turn. It needs to go from being a hardware business with a software and consulting edge to a company that mines data and melds social, mobile, cloud and cognitive thinking or artificial intelligence. Thirty percent of the company's good, 70% I can do without. But if it tips, there's a big win, especially if you think the dollar's peaked and this company has reinvented itself so many times, who am I to disagree with the Oracle.

Ah, best for last. Wells Fargo is a coiled spring, one rate hike away from $65, 10 points in a heartbeat, as it can make fortunes on its deposits. In the meantime, it keeps paying that large dividend, but it needs to be far more aggressive in its share buyback to truly get anywhere near where it issued so much stock to deal with the Great Recession.

Still, to me it's the least "tired" of the Big Four, the most inventive, and the one with the best growth. But let's be honest, if you had to start over with these same sectors, you'd go MasterCard or Visa; Pepsico (PEP), not Coca-Cola; Apple (AAPL), not IBM, and you'd keep the best bank in the world, Wells Fargo.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

Action Alerts PLUS, which Cramer co-manages as a charitable trust, is long AAPL, MA and WFC.

TAGS: Investing | U.S. Equity | Financial Services | Technology

More from Technology

Qualcomm's Latest Snapdragon Chip Announcements: 4 Takeaways

Eric Jhonsa
Dec 5, 2019 9:02 PM EST

The mobile chip giant just unveiled a new flagship mobile processor, along with several other products.

Microsoft Is Reportedly Prepping a Cheaper Xbox -- Here's Why That Makes Sense

Eric Jhonsa
Dec 5, 2019 4:55 PM EST

By launching a low-cost Xbox, Microsoft could grow the number of Xbox users it can monetize via game sales and an expanding array of services. AMD could also benefit.

Sector Geography Lesson, Japan's Stimulus and Zooming In on Zuora: Market Recon

Stephen Guilfoyle
Dec 5, 2019 8:48 AM EST

Plus, the Saudis look to press their oil agenda while Europe prints some ugly economic data.

Alphabet's Leadership Change Could Be Good News for 'Other Bets'

Eric Jhonsa
Dec 4, 2019 8:53 PM EST

With Sundar Pichai now the CEO of Alphabet, it's possible that the money-losing Other Bets segment will now run a tighter ship and/or see better execution.

Salesforce and Workday Drops Show That Wall Street Is Still Setting a High Bar

Eric Jhonsa
Dec 4, 2019 5:47 PM EST

While enterprise software firms are still generally reporting good top-line numbers, the group remains in multiple-compression mode -- for now.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 12:24 PM EST GARY BERMAN

    Fibocall: The SPX-Cash Long-Term View

    You will hear from many analysts on TV screaming t...
  • 10:35 AM EST BOB LANG

    Added Some Apple

    We'll take advantage of this pullback and add some...
  • 01:50 PM EST BOB LANG

    Added Some HD, MRTX

    We'll add this strong biotech name and a retailer ...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2019 TheStreet, Inc., 14 Wall Street, 15th Fl, NY, NY 10005

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login