My Family, My Dog, and Warren Buffett

Johnson & Johnson. Over the last ten years it (JNJ) has averaged 5.5 percent a year. Buffett is sitting on $2.78 billion worth of that turkey.

Warren Buffett photo: investing-school.com

(OCEANSIDE, Calif.) - I love my family, my dog and Warren Buffett. But these days, I am not taking investment advice from any of them.

Start with Buffett: Give him his props as the greatest investor in American history.

But that was yesterday. Today his fund is so large -- $200 billion plus -- and his choices are so limited -- huge cap stocks -- that he is just not getting the returns to match even one of his average years of the past.

And he knows it, recently telling investors there may come a time when he is forced to pay dividends because he simply cannot find a place to put $15 to $20 billion a year.

That time is today.

If you look at the Berkshire Hathaway (BRK.A) portfolio, it is full of good companies that are also lousy stocks.

Johnson & Johnson. Over the last ten years it (JNJ) has averaged 5.5 percent a year. Buffett is sitting on $2.78 billion worth of that turkey.

Same with Wal-Mart. Over the last ten years, Wal-Mart (WMT) has returned 1.8 percent per year. This is hardly the stuff of Hall of Fame careers.

Coca-Cola (KO) also looms large in Buffett’s portfolio. He likes to tell people his dividends from Coke will soon pay him more than what he payed for the stock. Whatever: Over the last ten years, the average return to investors from Coke 6.2 percent a year.

Berkshire Hathaway stock has returned about 5.9 percent a year over the last ten years. Not even Buffett will brag about that.

In the course of doing a daily radio on the stock market for the last 18 years, as well as being an investment advisor at Gunderson Capital Management, I have seen thousands of portfolios. I see portfolios full of these blue-chips all the time.

Investors love the big names. They ignore the lousy returns.They say 'look at the fundamentals. This stock is getting ready to do great things.'

Profit is the only fundamental. Lots of people ignore that.

Lots of good stocks are too small for Berkshire.

One of my favorites in this category is Green Mountain Coffee (GMCR) out of Vermont. If you ever slid a few quarters into the office coffee machine to brew coffee a cup at a time, you are probably using Green Mountain. It has been returning 87 per year for five years.

That kind of return opens up my eyes in the morning quite nicely, thank you. That is why I have had it listed as one of my Best Stocks Now! for more than a year.

How about a company whose chief spokesman is on just about every list of America’s worst actors?

A company whose stock just might be one of the most valuable of the last decade: Priceline, of course. Priceline (PCLN) has returned 29.5 percent a year over the last ten years. And 87 percent per year over the past five. All with a market cap of $26 billion.

That is Academy Award material.

With a market capitalization of $8 billion, Ross Stores (ROST) is too small for the Nebraska gang. But as they say, it is not the size of the dog in the fight, it is the size of the fight in the dog: This stock has risen 22 percent per year over last ten years.

Gardner Denver (GDI), Autozone (AZO), and Cognizant Technology (CTSH) are just a few more that are not big enough for Omaha, but just right for the rest of us who want value, performance, and profits, and who know better than to look for it at the dinosaur exhibit at the local Natural History Museum.

Which is a great place to take my family for a visit, my dog for a walk, but not to hunt for stocks.

Bill Gunderson is the owner of Gunderson Capital Management in Oceanside, California. Bill also hosts a show on kceoradio.com