2022 so far has been a challenging time to invest. Worries about pending interest rate hikes have put pressure on stocks. More recently, geopolitics has resulted in additional volatility. With this, and the end to the 2020-2021 runaway bull market, it may be the right time to consider adding more Warren Buffett stocks to your portfolio.
Warren Buffett, the “Oracle of Omaha,” has built a $113.6 billion fortune over nine decades of investing. That’s over good times and bad times. High inflation and low inflation. War and peace. Although his investing style has evolved since he started investing as a youth, his focus on fundamentals, not fads, and on high-quality stocks, has enabled shares in his firm, Berkshire Hathaway (NYSE:BRK-A, BRK-B), to compound at 18.3% per annum since 1965.
To invest like Warren, technically all you need to do is buy either BRK-A or BRK-B (most likely BRK-B, as BRK-A has never been split). But if you’re interested in buying just the publicly traded securities Berkshire holds in its portfolio, rather than owning Berkshire, you can do that as well.
Among the many stocks held by Berkshire, these seven may be ones to keep an eye on. This list is a mix of blue chips, value plays and even one that at first glance doesn’t seem to be something you’d call a Warren Buffett stock:
- Apple (NASDAQ:AAPL)
- Bank of New York Mellon (NYSE:BK)
- DaVita (NYSE:DVA)
- General Motors (NYSE:GM)
- Nu Holdings (NYSE:NU)
- U.S. Bancorp (NYSE:USB)
- Verizon (NYSE:VZ)
Warren Buffett Stocks to Buy: Apple (AAPL)
Ten years ago, it would’ve sounded far-fetched to say one day AAPL stock would be Berkshire’s largest stock holding. Given Buffett is best known for his holding of stakes in “old school” companies like American Express (NYSE:AXP) and Coca-Cola (NYSE:KO), investing heavily in a tech stock back then would’ve seemed unfathomable.
But like I mentioned above, Buffett’s investing style has gradually evolved with the times. Making his first fortune in “cigar butt” deep value stocks, by the 1970s, the legendary investor shifted focus to higher-quality, more blue-chip types of stocks. Companies with deep economic moats, like Coca-Cola.
Well, you can say that this tech giant fits that criteria. Tech may have been an area outside his “circle of competence,” as Buffett would say. Yet in recent years, tech has become a, if not the, dominant force in the global economy. With this, there are several “blue chips” within the tech sector, besides IBM (NYSE:IBM).
Apple, alongside the other FAANG components, are firmly within that category. Investing in it during the mid-2010s, at a cost basis of $35 per share, even with the tech sell-off, Berkshire is up more than $100 billion on its investment. Like other names in this space, returns going forward may be more modest than returns in recent years. Nevertheless, if you want to own a safe harbor stock that happens to be a tech company, you may want to buy it.
Bank of New York Mellon (BK)
Berkshire’s portfolio contains quite a few bank stocks. The most prominent of these bank stock holdings is Bank of America (NYSE:BAC). BAC has the second largest allocation among the Warren Buffett stocks.
But while there’s merit in making that money center bank a long-term holding, you may want to take a closer look at a less well-known banking name held by Warren. That would be Bank of New York Mellon Stock (BNY Mellon). Formed in 2007, when BNY merged with Mellon Financial, this is not the kind of bank you go to for an auto loan or mortgage.
Instead, it is primarily an asset custodian, with the remainder of its business made up of private banking/wealth management services. As a Motley Fool commentator recently argued, its fee-based revenue model makes it less risky than a traditional bank, where revenue is dependent on net interest income. That said, BNY is at the same time well-positioned to benefit from rising interest rates, much like the rest of the banking space.
With sell-side estimates calling for its earnings to rise by about 20% between 2022 and 2023, to $5.77 per share, BK stock looks like a wonderful business at a more-than-fair price (around $54 per share). Consider scooping some up after its recent pullback.
Warren Buffett Stocks to Buy: DaVita (DVA)
While a top ten holding, dialysis center operator DaVita is a much smaller company than the other names that are the largest positions in the Berkshire portfolio. With a market capitalization of $11 billion, it’s barely in the large cap stock category.
Yet among the Warren Buffett stocks, this is one that appears to be a bona fide value play. Trading for around 14.5x this year’s projected earnings, it’s fairly cheap for a high margin business that’s consistently profitable.
The market has cooled on DVA stock last fall, after its hot run during the pandemic recovery. A large factor behind its drop was management’s walking back of guidance. Following its projections of lower-than-expected earnings growth, investors overreacted, sending it down below $100 per share, only months after it had been trading for over $130 per share. More recently, the market has realized that its sell off was overdone.
The stock has partially recovered, and trades for around $115 per share today. Even so, don’t think you missed on making this a holding for your portfolio. Even if it doesn’t see any multiple expansion, if it sees its earnings per share (EPS) rise from $8.01 to $10.04 between this year and the next, it may have the ability to make a full trip back to its 2021 high.
General Motors (GM)
“Never bet against America” is one of many maxims Buffett likes to say from time to time. But for Buffett, this isn’t just something optimistic and patriotic to say. Berkshire owns many operating businesses across many industries that help make up the backbone of the U.S. economy.
In addition, Buffett likes to invest in well-established American industrial titans, if the conditions are right. One example is his investment in GM stock. While he has trimmed Berkshire’s position in the Detroit automaker, as of Dec. 31 his firm still owns 60 million shares, or around 4.15% of its outstanding shares.
Like what’s happened with its peer Ford (NYSE:F), General Motors has had a mix of bad news and good news in the past year. The global chip crisis has impacted automotive production. At the same time, though, it has been moving along with its own plans to make electric vehicles (EVs) a greater share of its product mix.
Better yet, unlike with Ford, which has already soared based on its initial success pivoting to EVs, GM is just getting warmed up. Accelerating EV production this year, success in this area, plus the easing of the chip shortage, could help charge up its shares to higher prices.
Warren Buffett Stocks to Buy: Nu Holdings (NU)
After discussing several more well-known Warren Buffett stocks, let’s look at one that’s more-under-the-radar, and a more recent addition to the portfolio: Brazil-based neo-bank Nu Holdings. Investing in it before its IPO, as InvestorPlace’s Brenden Rearick reported Feb. 15, Berkshire has invested another $1 billion into its shares.
A fintech-firm that’s crypto-friendly, this may seem like an odd investment for Warren Buffett. But this isn’t the first time Berkshire has invested in a fintech company based in Brazil. Payments company StoneCo (NASDAQ:STNE) is another holding in the portfolio, albeit one that hasn’t panned out too well.
So, with the Oracle of Omaha’s last foray a bit of a bust, why invest alongside him this second go-around? Yes, Nubank faces similar macro headwinds as StoneCo. Yet as my InvestorPlace colleague David Moadel argued last month, Nu has big potential to build up a massive customer base in Latin America, with its focus on providing financial services for the unbanked.
Also, by tripling down on NU stock, Buffett is doing what’s been a successful move for him over the past few decades: going against the grain. With fintech plays now out of favor, and the tough economic conditions in Latin America scaring off U.S.-based investors, now (as it trades for just under $10 per share) may be the time to enter a position.
U.S. Bancorp (USB)
Like AXP, KO and others, Berkshire’s position in USB stock is one it’s held for decades. Based in Minneapolis, Minnesota, the bank is one of the country’s largest. It operates over 2,400 branches in the Midwest and Western United States.
Like Buffett’s other banking holdings, rising interest rates bode well for U.S. Bancorp. As rates “return to normal,” its net interest income will rise up as well. Yet that’s not the only reason why this is one of the Warren Buffett stocks to buy. Other factors could help drive its gradual move to higher prices.
As a Seeking Alpha commentator recently discussed, its planned acquisition of Union Bank from its current parent Mitsubishi UFJ Financial Group (NYSE:MUFG) has a strong chance of being accretive to earnings. It may have the ability to do other opportunistic M&A (mergers and acquisition) deals as well.
To top it all off, it’s currently sporting a 3.25% dividend yield as well. This payout has grown an average of 11.4% over the past five years, with eleven consecutive years of dividend growth. Trading for around $57 per share today, this isn’t a stock you’re going to “get rich” on. But if solid, steady returns are your focus, USB stock is something to consider.
Warren Buffett Stocks to Buy: Verizon (VZ)
Owning around $8.5 billion worth of shares, VZ stock is another of Berkshire’s largest stock holdings. Like USB stock, I admit this isn’t a stock you should buy if you have high upside potential in mind.
Although cheap, based on its price-to-earnings (P/E) ratio of 10x, upside from multiple expansion may be limited. Even if the market’s sentiment on the telecom giant improves (say, from success stemming from the 5G rollout). Historically, Verizon has traded at a P/E ratio in the low-teens.
But if high price appreciation isn’t your main focus? It may just well be another great addition to your portfolio. For one, it’s a high yield stock. Its forward yield today is around 4.79%. Even as it’s only slightly raised its dividend in recent years, with a payout ratio of 46.94%, it may have room to boost it further. Once its capital expenditures (capex) start to come down, the company will have more funds available for higher dividends.
Along with its appeal as a dividend stock, it should be noted that VZ is also a low-volatility stock. If the market continues to swing wildly, this may be a lower-risk place to park some of your investment capital, as the market responds to overarching changes/challenges.
On the date of publication, Thomas Niel did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.