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Stocks in a Slump, and Look Who's Buying
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But some money managers and analysts have a more tempered view of the prospects for Buffett's choices. In the case of Kraft, they cite inflationary worries, noting that commodity prices have risen and that the company would probably see an even greater rate of cost increases in the year ahead.
Buffett, a director of The Washington Post Co., was not available for comment.
And while Wells Fargo and U.S. Bancorp are safe bets, they're probably not the names you want to own if you're trying to maximize return from banks over the next few years, said Wendell Perkins, chief investment officer of Optique Capital Management.
Instead, Perkins has turned to another bank in recent months: BB&T, a retail and commercial bank based in Winston-Salem, N.C. The stock is off 23 percent from its 52-week high and trading at roughly 11 times its earning estimates for 2008. (Wells Fargo is off 17 percent from its 12-month high, and U.S. Bancorp is off 11 percent.)
BB&T doesn't have "a big presence in the Florida market or Texas market," Perkins said. "They're not in the Rust Belt, which also is challenged. They're sitting in a real sweet spot: the Carolinas, Georgia, areas of the country that have been much more stable."
Perkins said he does concur with Buffett on GlaxoSmithKline.
"You're dealing with a world-class pharmaceutical that has a wonderful breadth of resources, a great reputation, a super drug pipeline long-term," he said.
Perkins, who owns the stock, said it has been hit mainly because of disappointments surrounding Avandia, the diabetes drug that hurt the company last year after a report of increased cardiovascular risks.
Others said there were larger issues, including competition from generic drugs and a new White House administration that could be tougher on pharmaceutical companies.
"Big pharma stocks' valuations are very attractive, but they face some significant headwinds," said Mills of T. Rowe Price. "Glaxo is not my favorite position in the portfolio. It hasn't been a success story for us. It's cheap enough that it's reflecting a lot of the bad news, and obviously, I think it's worth hanging on to."
In the meantime, Mills is putting new money into select financial stocks and other areas while shedding some names in the sector.
Financials present some excellent opportunities, Mills said. "But you have to be careful, because the market has gone down for a reason, especially in the financial sector."
