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The past few weeks have been exciting ones for British investors. The FTSE 100 index of leading British companies has repeatedly hit new all-time highs this year. That is exciting – but it also puts me in mind of some of the investing wisdom of billionaire Warren Buffett.
For example, Buffett famously said that people ought to be greedy when others are fearful and fearful when others are greedy. So there is clearly a fair bit of greed in today’s market, could now be the time to be fearful?
Some valuations look hard to justify
I think so. Some parts of the market, especially across the pond, have valuations that personally I reckon are hard to justify. In fact, last week I went through my portfolio and sold a number of holdings to take some profits while the going is good.
In some cases I sold part of my stake in a company but hung onto some shares, while in others I sold out of the company altogether.
I wanted to convert some paper profits to actual cash profits. So in that sense, it seems I was being fearful in the face of some investors’ apparent greed.
This is a complicated market
But listening back to that Buffett quotation, it can also be a bit of a simplification. After all, right now the whole market is not greedy. I do not therefore think I ought to be completely fearful, according to Buffett’s logic.
Rather, there is a mixture of both fear and greed at play. So while I have been selling shares in some companies, I have been eyeing others up as potential additions to my portfolio.
Fortunately, even now, I continue to think there are quite a few possible bargains hiding in plain sight.
A share I like that reminds me of Buffett
For example, one share I think continues to look cheap from a long-term perspective is food maker Campbell’s (NASDAQ: CPB). I see it, to borrow another phrase from Buffett, as a great business selling at an attractive price.
It sells for 11 times earnings, having fallen 46% over the past five years. That is a terrible performance, given that the wider Nasdaq market has moved up 79% during the same period.
The price fall reflects multiple risks facing the company, including declining revenues stemming from changing consumer food preferences and considerable debt levels.
Buffett is certainly familiar with such challenges as shifting tastes, having invested in Kraft Heinz. But he also knows that strong brands with deep heritage and pricing power can be powerful ways to build wealth over time.
That logic explains why I have invested in Campbell’s this year. Its problems may not be solved any time soon, but I reckon it has what it needs to fix them in the medium term.
The business remains profitable and the share price fall means that the share now yields 6.8%. At that level, I am happy to sit back and simply earn passive income while waiting in hope for share price recovery.
I see Campbell’s as a share worth considering, not only for its headline-grabbing dividend yield but also what I consider to be an attractive valuation.
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Christopher Ruane owns shares in Campbell’s.
This story originally appeared on Motley Fool
