If Warren Buffett were looking at the ASX, would Afterpay Touch Group Ltd (ASX: APT) and Commonwealth Bank of Australia (ASX: CBA) be his type of stocks?
In my opinion, Warren Buffett is the best investor that has ever lived. He may not have the strongest record as other people over certain time periods, but when you also consider the number of people he has inspired, the lessons he has given to the world and his incredible philanthropic commitment, I think he is a wonderful man.
Would Warren Buffett Look At Afterpay And CBA?
Berkshire Hathaway has mostly stuck to investing in businesses headquartered in the United States, but that’s not to say that he wouldn’t ever look at ASX shares.
In recent years the investment conglomerate made a sizeable investment in Insurance Australia Group Ltd (ASX: IAG). However, what about two of Australia’s most popular shares?
Commonwealth Bank of Australia
Berkshire Hathaway is quite a substantial investor in US banks. At the end of 2018 it had US$22.6 billion of Bank of America shares, US$4 billion of The Bank of New York Mellon shares, US$3.1 billion of Goldman Sachs, US$5 billion of JPMorgan Chase, US$6.7 billion of US Bancorp and US$20.7 billion of Wells Fargo.
Therefore, looking at all of those investments above, I think Warren Buffett would definitely think about investing in Australia’s biggest bank which has a higher focus on consumer banking and is supposedly higher quality than other ASX banks like Australia and New Zealand Banking Group (ASX: ANZ).
However, with Mr Buffett’s mantra of only being greedy when others are fearful, Berkshire Hathaway would probably only consider investing during an Australian recession.
Afterpay Touch
Afterpay is a much more interesting one. Warren Buffett has always loved businesses with loyal customers and a strong brand. Afterpay does tick those two boxes with a high level of recurring customers and nearly all Australians knowing of Afterpay – some people now use Afterpay as a verb “Afterpay it”.
But, Warren Buffett has also famously stuck to businesses in his ‘circle of competence’. Is the buy now, pay later industry in Warren Buffett’s circle of competence? Maybe, but I could imagine him arguing that Afterpay may not have as strong of a moat as it appears with all of the similar competitors out there.
However, with a recent change of heart and a large investment in Apple, it’s certainly possible that Afterpay Touch could pass a few of the modern Warren Buffett’s tests. But I think the valuation and lack of profit would turn off the Sage from Omaha.
I do think that the reliable and proven ASX shares in the FREE REPORT below could also pass the Warren Buffett test like Commonwealth Bank.
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