Here are five picks from Berkshire’s portfolio that warrant your attention
Warren Buffett is unarguably one of the greatest investors in history, so it’s no wonder these five Warren Buffett stocks are succeeding. The Oracle of Omaha rarely makes a mistake in the world of investing, and that’s why top traders and newbies ardently follow Berkshire Hathaway’s (NYSE:BRK.A,NYSE:BRK.B) portfolio in order to stay one step ahead of the market.
The firm filed its latest 13F filing on May 15, and the major news coming out of the filing was Buffet dumping airline stocks. However, there are also several positions in the portfolio that are permanent fixtures, and those are the ones we will be concentrating on today.
The five Warren Buffett stocks to buy are:
Year-to-date price movement: 64%
The first of the Warren Buffett stocks on this list is Amazon. Buffet is a master of pickling stocks, but there are times when even the great man can falter.
In an interview with CNBC, Buffet had said that Amazon’s success far surpassed anything he ever dreamt. “I had no idea that it had the potential. I blew it.” The legendary investor regrets not pouring capital into the company sooner.
Despite doubling since March, AMZN stock still has a lot of upside left. With a product suite tailor-made for the novel coronavirus pandemic, the company still has a lot of room to grow and thrive.
More importantly, the company is investing in disruptive markets to take advantage of the “new normal.” One of these investments is Zoox, an autonomous vehicle company based in California.
However, AMZN stock is certainly not cheap — it trades at a price-to-earnings ratio of 152.84x and a price-to-cash flow ratio of 40.17x. Still, if history is anything to go by, you won’t go wrong investing in Amazon.
Year-to-date price movement: 33%
Apple is a marquee name in the investment world. It’s no surprise Buffett values the stock highly, considering the staggering bull run it has been on for several years now. Even if the company suffers the odd lousy headline, it is a bellwether for the tech industry. The position is valued at approximately $96 billion in the portfolio.
That is quite astounding since Buffet has always advocated having a diversified approach to investing. Then again, this is AAPL stock we are talking about. The company exceeds expectations and smashes records with each earnings release.
Every week we will have a new update from Apple that bolsters its shares even higher. Whether its the latest upgrade to the iPhone 12 Pro or the company’s trade-in program, there is always plenty to look forward to if you are an Apple customer or stockholder.
In its Q2 earnings release, Apple said it’s boosting its share repurchase program by $50 billion. That means the tech giant will have the ability to repurchase up to $90.5 billion of stock — no mean feat in this environment and a move that should send AAPL stock further northward.
It’s no wonder that the stock is trading at a forward price-to-earnings ratio of 30.94 times. Expect the company to feature in Berkshire Hathaway’s portfolio for a long time to come.
Year-to-date price movement: 23%
An exciting position in Berkshire’s portfolio is the credit rating agency Moody’s. To the surprise of many, shares of the firm are on a bull run of sorts, having risen over 20% year to date.
Moody’s is primarily a leading provider of credit ratings. However, the firm is much more than just a rating agency. Analytics contributes 40% to its total sales revenue. And more importantly, it is a growing segment — Moody’s recently acquired Regulatory DataCorp, a data and technology risk management company that focuses on ensuring organizations comply with money laundering legislation.
Coming back to the rating business for a moment, Moody’s, along with S&P Global (NYSE:SPGI) and Fitch, has an effective monopoly over the sector. At the start of the Covid-19 crisis, many people feared the rating industry was in for a rough time since many companies would pare down debt to sustain operations.
However, contrary to that belief, debt issuances are on a high. Benefiting from the experience gained during the 2008 financial crisis, the Federal Reserve slashed interest rates to the bone. It encouraged companies to borrow enough capital to survive the crisis and keep paying employees. That’s why the current economic landscape looks very different from the post-2008 scenario.
All that debt will keep Moody’s quite busy throughout the year, and that momentum won’t stop until we firmly see the back of this crisis.
Year-to-date price movement: 11%
Another interesting company in the portfolio of Warren Buffett stocks is Costco (NASDAQ:COST), whose services have become as essential during the pandemic as Zoom (NASDAQ:ZM) and Slack (NYSE:WORK). Buffet has been a long-term believer in the business and has heaped praise on its management and operations on many occasions.
Berkshire Hathaway holds a 1% stake in the company, valued at approximately $1.4 billion. But his reach over the company’s operations far exceeds this. Buffett’s long-time confidante Charlie Munger, who is also the vice-chairman of Berkshire Hathaway, sits on Costco’s board.
There is a belief that the sharp share price movement is mostly down to panic buying induced by Covid-19. I don’t buy that argument, although we are inching closer to a vaccine, the virus is likely to have a long-term impact.
With talks already of a second wave, shoppers could flock to Costco outlets to stack up on essentials before any potential lockdown. No matter how you slice it, COST stock is a winner.
American Express (AXP)
Year-to-date price movement: -22%
There’s no doubt that Buffett is always looking for an excellent investment, and his ability to see the bigger picture sets him apart from almost every other trader. That was the case in 1964 when the legendary investor swooped in to buy American Express at a time when the financial services company was rocked by scandal.
Buffet’s strategy revolves around investing in great companies at attractive entry points. American Express fits the bill and then some. Since it’s inception to the present day, the company has always had a customer-first approach and capable management.
This was why Buffet invested in AXP stock all those years ago; a move that made him millions within a few months, when share prices recovered shortly after that. He has remained a loyal stockholder since then and has a keen eye on the company’s affairs.
Just recently, he called up CEO Stephen Squeri to emphasize the importance of safeguarding the company’s brand during these testing times. The conversation highlights how highly Buffet thinks of AXP’s image. Hence, don’t let the drop in share price fool you; AXP stock is here to stay and will erase its losses in quick time.
Author: Faizan Farooque
Source: Investor Place: 5 Warren Buffett Stocks You Should Snap Up