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TheStreet Open House

Dion's Weekly ETF Blog Wrap

Stocks in this article: ITA EWD SIL

NEW YORK ( TheStreet) -- Don Dion posts his current insights on the stock, bond, commodity and currency markets in his RealMoney blog, anticipating which ETFs will be in play next.

Here are three of his blog posts from the past week:


An ETF With a Buffett Angle

Published 3/2/2011 2:41 p.m. EST

As is generally the case, investors and commentators are poring over the latest annual Buffett missive, trying to extract the intentions of one of the world's most successful investors. One of the more interesting results of this year's letter is a new list from Bloomberg Data of companies that are potential Buffett targets. Using the takeover requirements listed by Buffett, Bloomberg generated a list of firms that could potentially meet his investing criteria.

Looking over the list, which spans a wide range of firms, a few names and categories begin to stick out. One grouping of firms that meet the Buffett criteria include high-profile aerospace and defense names. The list includes General Dynamics (GD), Lockheed Martin (LMT), Raytheon (RTN) and L-3 Communications (LLL). While these names make up just a portion of the Bloomberg Buffett list, they all appear in the iShares Aerospace & Defense ETF (ITA).

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I've been bullish on defense as international demand amps up, and Buffett's criteria vets these companies even further. Cornerstones of ITA listed above all fit the Buffett letter criteria, which includes:

  • market cap between $4 billion and $40 billion;
  • return on common equity >10%;
  • five-year net income growth in highest 50%; and
  • capital expenditures / total assets > 0.5.

While these defense firms may not ever be actual Buffett targets, their inclusion in a limited list of names that fit the investor's criteria certainly highlights common strengths.

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