Why Warren Buffet Should Buy Corning, Inc.
January 13, 2013
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It's asinine for me to be giving advice to someone worth $46 billion, but here goes:
Warren Buffet should buy Corning, Inc. (NYSE: GLW)
1. By george, it's an elephant!
His gun is loaded and his trigger finger is itchy. (Sounds like a personal problem.) But seriously, he said in his annual shareholder level in 2012 he wanted to go elephant hunting, meaning he was looking for companies to acquire (in the $20 billion range). GLW is currently worth about $18 billion. Berkshire-Hathaway (NYSE: BRK-B) has become so large that smaller acquisitions don't even move the needle.
2. Consistent earnings.
Buffet's teacher at Columbia, Benjamin Graham, cared more about average earnings than 12 month's trailing earnings (and ol' Ben hated forward earnings.) GLW's net income over the last five years works out to $3.2 billion net income per year!
3. It's cheap.
Buffet has been willing to pay ten times net-income in the past. Valuing GLW at ten times net income would put them at a $32 billion market cap. That makes them grossly undervalued compared to their current market capitalization.
4. Green lasers (Pew pew pew!)
"Green lasers" refers to laser projection technology that would allow cell phones/tablets to show videos and movies on walls. This is only one of Corning's many exciting future technology projects. As a matter of fact, GLW spends $1 billion per year on research and development. This R&D has resulted in huge innovative breakthroughs such as gorilla glass, willow glass, LCD glass, etc. Like several big companies (Google, IBM, etc.) their efforts in R&D will advance their technology greatly. (Hey, maybe we could get them to do something with copy machines. SERIOUSLY, COPY MACHINES NEVER WORK.)
5. Gorilla glass is the future.
Actually, it's already here. Everyone you know has a smart phone or a tablet or a mixture of both. Your friends have it, your mom has it, the kid down the street has it, and ITS ALL COVERED IN GORILLA GLASS! Rapidly developing countries (China, India, Brazil, Russia) are just now getting into the smart phone game. With global smart phone sales reaching over one billion devices this year, you can bet GLW is going to get their share of that action.
6. Berkshire-Hathaway doesn't have enough history.
Starting in 1888, BRK just isn't old enough to be tried and true (obviously, I'm being sarcastic.) However, it is worth noting that GLW was founded in 1851. (Millard Fillmore was president, and that dude was 3 presidents before Lincoln!) That means the company has survived the Civil War, two World Wars, a tech boom and crash, the Great Depression and many MANY other events.
7. I own lots of GLW.
One of the reasons I own GLW (and a lot of it....so much...) is that they are trading below book value, which means Wall Street is valuing them worth more dead than alive. They also have no debt after backing out net cash. They pay a 3.1% dividend. I like the CEO. He joined Corning in 1983 and worked his way up to CEO in 2005. I believe Corning's future is blindingly bright. Just check out this video, called 'A Day Made of Glass.'
It's worth noting that I love Mr. Buffet. He's giving away the majority of all the money he's ever earned to charity. He's funny, humble, intelligent, and shrewd. I admire Berkshire's results. I post Berkshire's results on my wall (my actual wall, not my facebook wall) for inspiration and humility....because my personal returns suck compared to theirs.
What I'm trying to say is, if Warren Buffet walked into my office and asked me for advice on future investments (hey, a man can dream, right?) I would not hesitate to say "Buy Corning. Buy the whole damn company."
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