‘Britain’s Warren Buffett’ isn’t a fan of UK shares (except this one)

Despite the uncertainty resulting from President Trump’s erratic approach to tariffs, UK shares have held up remarkably well over the past few weeks.

Since 7 April, the FTSE All-Share index has risen over 11% and has recovered nearly all of its pre-‘Liberation Day’ losses.

The ‘Oracle of Omaha’

But not everyone shares this enthusiasm for UK equities. Warren Buffett, possibly the world’s most famous investor, has a clear preference for US stocks.

In his most recent letter to Berkshire Hathaway shareholders, the American billionaire said: “Rest assured that we will forever deploy a substantial majority of [your] money in equities — mostly American equities although many of these will have international operations of significance”.

Closer to home

It also appears as though Terry Smith, who has been described as ‘Britain’s Warren Buffett’, is sceptical of domestic stocks.

During a recent BBC interview, he said there’s a need for “better companies in the UK” and that there’s “only a handful of companies that I would regard as OK for me to invest in”.

Smith went on to say there were “large swathes of the UK market, in things like oil and gas, and banking and utilities, that I just don’t regard as of the quality required”.

However, there appears to be at least one exception.

A global market leader

In 2024, Fundsmith, the investment vehicle Smith set up in 2010 and still runs today, purchased £78m of Unilever (LSE:ULVR) shares. A year earlier, it bought £274m of stock in the fast-moving consumer goods conglomerate. At 30 April, it was Fundsmith’s 10th most valuable holding.

And I can see its appeal. Unilever is an enormous group with a market-cap of £120bn. It claims 3.4bn people use its products every day. In 2024, its top 30 so-called ‘power brands’ contributed over 75% of turnover and profit growth.

It’s also a reasonable — if unspectacular — dividend stock. Based on amounts declared over the previous 12 months (150.21p), it’s yielding 3.1%.

Importantly, with its huge portfolio of well-known brands and market dominance in many sectors, it could act as a hedge against wider stock market turbulence. History tells us that, generally speaking, even during an economic downturn and periods of global uncertainty, consumers still prefer to buy branded products.

During 2020, at the height of the pandemic, Unilever was able to increase its post-tax earnings.

Some challenges

But this doesn’t give the group a licence to print money. All consumers have a price limit and there’s a danger that once they substitute the company’s products for cheaper alternatives, they may never return.

And despite its financial firepower and balance sheet strength, due to its global presence and complicated supply chain, it’s not immune from Trump’s tariffs.

Also, its shares aren’t cheap. They currently trade on 24.5 times the group’s 2024 diluted earnings per share.

That’s why, in my opinion, it’s not the type of stock that’s going to deliver huge returns — since May 2020, its share price has risen 17%. But its defensive characteristics could make it one for cautious investors to consider.

The post ‘Britain’s Warren Buffett’ isn’t a fan of UK shares (except this one) appeared first on The Motley Fool UK.

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James Beard has no position in any of the shares mentioned. The Motley Fool UK has recommended Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.