Our best wishes to Russ Kaplan; the Buffett/Graham-style advisor has joined Nebraska-based Fox & Hoagstrom Financial Group. In his latest The Heartland Advisor he reviews two recommendations that incidentally have both attracted the attention of Warren Buffett’s Berkshire Hathaway.
Our new current stock recommendation is Goldman Sachs (GS), an investment management company founded in 1869.
In April, the firm reported earnings of $5.15, which was below expectations. Although it performed better than the previous year, the stock declined on the news. This appears to be a great over-reaction and puts Goldman Sachs into the Buy territory.
Although below expectations, the quarterly earnings report was still good, and one report does not constitute a trend.
Goldman had a return on equity of 11.4%, which is considered a good measure of profitability. it has a price/earnings ratio of15, and a financial strength rating of A++.
The stock pays a dividend of only 1.15%, so it is probably not appropriate for those looking for income.
Some of the risks to investing in GS may include an extended slowdown in the capital markets, including mergers and acquisitions, as well as equity and fixed income. Goldman will have to manage these risks to avoid another quarter like the one just announced.
Meanwhile, the CEO of the company, Lloyd Blankfein, owns 1.5 million shares while Berkshire Hathaway (BRK.A) owns 11 million shares.
United Continental (UAL) is our new stock of the month in our new Friday Stock Ticker service.
United has over 1,000 planes in the worldwide fleet.
Berkshire Hathaway jumped on the airline bandwagon late in 2016; it now owns 7% of UAL, as well as shares of Delta Airlines (DAL) and Southwest Airlines (LUV).
United—following the recent negative publicity where a man was forcibly removed from a flight—will have to improve their customer service and public communication if they want to remain competitive with their peers.
Other risks include extremely volatile fuel prices, severe price competition, and the capital-intensive and cyclical nature of the airline business. We consider the stock inexpensive, with a price to earnings ratio of 12, and a position cash flow.
Russ Kaplan founded Russ Kaplan Investments 30 years ago.
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