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3 Small Caps to Invest In Like a Young Warren Buffett

Buffett would love these stocks...and so should you

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1. Haverty Furniture (HVT)

Buffett is a lover of furniture companies. Berkshire Hathaway owns several, including Jordan’s Furniture, a furniture retailer founded in 1918 in Massachusetts. But one of his more famous investments was the 1983 purchase of Nebraska Furniture Mart. Headquartered in Omaha, Nebraska, it was started in 1937 by Rose Blumkin who sold it to Buffett with a handshake deal.

It has three stores, including one in Omaha, one in Kansas City and one in Des Moines, Iowa. Expansion into Northern Texas is expected in the next several years.

Haverty Furniture fits within Buffett’s model. Founded in 1885, and public since 1929, it is headquartered in Atlanta and still has Havertys working in the management team. The company has now grown to over 119 stores in 16 states.

On Oct 30, the company reported a record third quarter as it blew by the Zacks Consensus Estimate by 24%. Earnings of $0.42 were up 180% compared to the year ago quarter as the company cut expenses.

Sales rose 11.6% with same-store-sales jumping 11.8%. The average ticket gained 5.6%.

The company finished the third quarter with $79.1 million in cash and NO debt.

Valuations are still attractive even though the shares are at 2-year highs. Haverty’s is benefiting from the housing market recovery. Earnings are expected to rise 98% in 2013 and another 16% in 2014.

  • Forward P/E = 21.7
  • P/B = 2.3
  • P/S = 0.9
  • Zacks Rank #2 (Buy)
  • Market Cap: $650 million

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