You might think Republicans are the most bullish on America. Or Democrats are. Or immigrants who recently became U.S. citizens are.
They all are, of course.
But among Americans with high profiles, one person is perhaps more bullish on this country than anyone else -- so much so he's bet billions of dollars on it.
That person is Warren Buffett.
In late 2009, when Buffett's Berkshire Hathaway (BRK.A) spent tens of billions of dollars to buy the nearly 80% of rail operator Burlington Northern Santa Fe Corp. it didn't already own, he jubilantly described the investment as an "all-in wager on the economic future" of the U.S. "I love these bets," he said.
"There's no way you can bet against America and win," he said in a recent television interview.
And Buffett discussed his feelings about Standard & Poor's downgrade of U.S. government debt in Fortune Magazine: "... I don't agree with the Treasury downgrade. U.S. Treasuries are still triple-A in that there is no question that we will repay the interest and the principal. Every contract will be repaid."
Amid the market meltdown that followed the S&P downgrade, Buffett remained steadfast: "The lower things go, the more I buy."
We are not Warren Buffett. But because we can't know what his next move will be, it doesn't mean we can't learn something important from watching him. With lots of negative economic news and low consumer and investor confidence, stock prices are struggling, which means, as Buffett says, now is the time to buy.
Of course, going big into the market right now requires nerves of steel, a stomach immune to turmoil and a heart that beats steadily no matter what happens in the outside world. If risk and volatility drive you to distraction, this is probably not the time for you to buy.
But if you are willing take a chance because you believe the smart time to buy is when the market is in the doldrums, and remain confident that the U.S. has great economic strength and resiliency, follow Buffett's example and buy today.
Buffett doesn't reveal which companies he covets, but I have an investment strategy modeled after his approach to investing that pinpoints companies that meet many of the criteria he uses when pouncing on a stock. Since I started following this strategy in 2003, my Buffett model portfolio has returned 24.5%.
The strategy currently targets Hansen Natural (HANS) as a very promising investment opportunity. To qualify as a "Buffett-type" company, a company must enjoy a competitive advantage, such as being a leader in its market or having a strong brand name. Hansen is in the beverage business. Probably its best-known product is the second-best selling energy drink, Monster Energy (Red Bull is at the top). The company's product line also includes Hansen's Natural Cane Soda, Hubert's Lemonade and Admiral Ice Tea, among others.
Aspects of Hansen liked by the Buffett strategy are its predictable earnings, lack of long-term debt, solid 27% average return on equity over the past 10 years, and positive cash flow per share. In addition, this strategy, alone among the strategies I use, makes a prediction of an investor's expected annual rate of return when buying the stock at its current price and holding it for the next 10 years. The strategy wants this return to be about 15% or more. Hansen's expected annual return is an excellent 19.1%.
The blandly named Waters Corp. (WAT) gets high marks with the Buffett strategy. A leading maker of analytical instruments for the pharmaceutical, biochemical and industry markets, its products use a variety of technologies, including liquid chromatography, mass spectrometry and thermal analysis. Waters' earnings are predictable (they declined just once in the past 10 years), it can pay off its long-term debt within two years, has had an average return on equity of 33% for a decade, and generates positive cash flow per share. Its expected annual rate of return to investors is 23.2%.
Both companies have solid market positions and strong financials. If you're intimidated by today's roiling markets, it's probably best to sit on the sidelines.
But if you think that Buffett is right about the underlying strength of the U.S. economy, and you have the guts to take a gamble, these are two companies worth adding to your portfolio.