Although overall market prices remain high—taking the S&P 500 as an example, its price-to-earnings ratio has exceeded 25 times the earnings of the past 12 months, and its forward P/E ratio is also near 22 times, both reaching multi-year highs, which has deterred many investors—there are still some reasonably valued targets in the market worthy of long-term holding.
The food industry is often seen as an area of slow growth, low profit margins, and intense competition. General Mills’ (GIS) stock price has fallen 44% from its 2023 peak, reflecting challenges such as post-pandemic sales and profit declines. However, the excessive sell-off may have exceeded a reasonable range. Although the company is currently under pressure, with both organic revenue and operating profit declining in the latest fiscal quarter and its outlook for the current fiscal year being conservative, it has launched a comprehensive transformation plan aimed at adjusting packaging, pricing, and promotion strategies. Particularly noteworthy is that General Mills plans to buck the trend by increasing marketing investment to capitalize on the current economic environment where consumers are more value-conscious. Surprisingly, for a company with many well-known brands, its stock has a forward P/E ratio of less than 14 times, while offering a dividend yield as high as 4.9%, and boasts a solid record of consecutive dividend payments spanning over a century. This provides investors with a considerable margin of safety and a source of income.
For Alibaba (BABA) shareholders, this year has been quite rewarding. The stock price has rebounded significantly since the end of 2024, primarily driven by its positioning in the field of artificial intelligence. While e-commerce remains its core business, its Cloud Intelligence Group has achieved astonishing growth due to the launch of the Qwen conversational AI platform. The context of the AI competition between the U.S. and China provides unique opportunities for Chinese tech companies. Analysts have used the phrase “the awakening of a sleeping giant” to describe the prospects of China’s AI industry, which is expected to deliver substantial investment returns by 2030. Through efforts such as its self-developed AI chips, Alibaba is poised to play a key role in this growth. More strategically, AI development could stimulate domestic consumption in China, which in turn would benefit Alibaba’s core e-commerce business. Although realizing this prospect requires the synergy of many factors, its current P/E ratio of less than 20 times appears attractive relative to its earnings growth potential.
As a diversified conglomerate, Berkshire Hathaway’s (BRK.A) (BRK.B) current P/E ratio of around 20 times is quite noteworthy. It is important to clarify that Berkshire Hathaway is far from a simple collection of stocks. Approximately one-third of its massive market capitalization comes from its holdings of publicly traded stocks, another third from its enormous cash reserves, and the final third reflects the value of its numerous high-quality, wholly-owned private businesses (such as Geico insurance, BNSF Railway, etc.). These private businesses contribute tens of billions of dollars in stable operating profit annually. Valuing the stock based solely on this recurring profit already makes the price seem reasonable. More appealing is the downside protection offered by its asset structure: the one-third cash in its portfolio acts as a safety cushion. Even if its stock portfolio experiences volatility, the value of its cash-flow-strong industrial businesses and its cash reserves can support most of its intrinsic value. Therefore, its current valuation may underestimate the overall risk resilience and long-term growth potential of its portfolio.
