TGI Friday, February 24, 2012, Prescott, Arizona, USA
One week into the March monthly expiration cycle and all we can think of is cereal and macaroni and cheese. Huh? What sort of tangent is FHW going to take us on this morning, you are now wondering... Well, being almost springtime in the mountains of Arizona, our pretty blonde-better-half decided to start getting ready for summer (when we leave for over two-months), and clean out some of the kitchen and bathroom cabinets. How many half-used boxes of mac and cheese and half bottles of maple syrup can there be? And how many dozens of barely opened cartons of other dining "necessities" can any one family have, she questioned? All while seeming to scream into the deep kitchen cabinet. "There are ten-different open boxes of cereal alone, and it is already getting too warm outside to have eighteen Maple & Brown Sugar oatmeal packets." And we also noticed a variety of green and chai tea boxes, also pretty-much only enjoyed on cold winter mornings.
"Can you whip up some funky syrupy mac and cheese/oatmeal/Wheaties and Mini-Wheat concoction, and throw in all the half-bags and boxes of every kind of noodle and pasta imaginable" we asked? Ducking, we just avoided an aged bag of brown rice that came flying out of the cherry-wood kitchen cupboard. "C'mon dear, you are the 'chief cook and bottle washer' of the family, aren't you?" "Yes" she replied, but you are the one who goes to the store and buys all this stuff." Trying to come-up with a reason for all the mac & cheese boxes, we said "well, we haven't had mac & cheese in months, but now that we think of it, where is Kraft Foods (KFT)?" "What?" "If we go-through possibly hundreds of different KFT products, many obviously only in "partials", there have to be millions of other families that do the same" we rationalized, with an investment thought in mind. "Besides, Warren Buffett likes KFT, (not Kentucky Fried Thicken) so their stuff must be pretty good." "Whatever - just go get another plastic garbage bag" replied the cabinet cleaner. We guessed that meant, as we loaded up another trash bag, no Cheerio/egg noodle/kitchen bouquet/Wheat Thin combo for dinner tonight!
Buffett really does invest in companies whose products he actually likes, or has some relationship with, and so do we. He must drink Coca-Cola, because he owns a massive piece of that firm (KO). Whereas we prefer, but seldom drink, Pepsi (PEP) products. He must also use a variety of kitchen and bath products from Procter & Gamble (PG), Kraft (KFT) and Johnson & Johnson (JNJ), so he has major holdings in those companies as well. We have never seen him shop, but he must do it at Costco (COST) and Wal-Mart (WMT*), as he is also a major shareholder in those leading retail outfits. Buffett may bank at Wells Fargo (WFC) or Bank of America (BAC*) and swipe an American Express card (AXP), or else his huge stake in those finance outfits would not make sense. And we are almost certain that he has Intel (INTC*) chips in most of his hi-tech stuff, even if he claims not to be a tech-geek.
All of the above mentioned stocks pay relatively strong dividends and also have plenty of options open interest and daily trade, making them great investment grade / long-term holdings. Why else do you think Mr.Buffett, and his Berkshire Hathaway holding company (BRK/A and BRK/B), has done so well over the course of time. If, however, you are thinking of one of these as a long-term hold, they have all had major runs higher over the last few months, so you might want to wait for a pull-back, or sell some puts. Now we are wondering if Mr. Buffett also throws away a lot of kitchen cabinet stuff, or maybe one of his servants does it for him!
"Our favorite holding period is forever." -- Warren Buffett
Have a great weekend!
(* = FHW position)