Pursuing a relatively simple strategy of finding undervalued stocks and holding them for decades at a time, Buffett has managed to amass one of the largest fortunes in the world over a career that has spanned more than 60 years.
Thanks to his success, investors often look to Buffett’s portfolio in search of great stocks to buy. At the moment, three of Buffett’s holdings look to be good buys at their current prices. Here are three Buffett stocks on sale:
Cloud computing company Snowflake (NYSE:SNOW) is a prime example of a good company that is currently trading at a discount. The stock has lost 48.7 percent of its value YTD, mainly on investor concerns about its lack of profitability. Despite the losses, however, Buffett has held onto the stock, likely due to its strong future potential.
In Q4, Snowflake achieved revenue growth of 101 percent. While growth is slowing, the company still expects to deliver revenue increases of 79 to 81 percent year-over-year in Q1.
Spending among existing customers also rose by 78 percent in Q4, pointing to Snowflake’s ability to make the most of its current customers while continuing to engage with new ones.
As with many cloud computing companies, Snowflake also maintains excellent margins. Although the Q4 margin slightly missed analyst expectations, it still came in at 70 percent. Paired with rapid growth and continued improvements in customer spending, these margins should put Snowflake in a strong long-term position.
As with any stock Warren Buffett buys, Snowflake has been anointed as a company that will succeed over the long haul. However, there could also be some substantial gains ahead for investors over the next 12 months. Analyst forecasts give the stock a median 12-month target price of $305, up 75.5 percent from the current price.
Even the lowest forecast price of $190 would give the stock a modest 9.3 percent upside. Given these ratings, it’s quite possible that Snowflake is currently oversold and will rebound sometime this year.
In spite of investor concerns over profitability and slowing growth, Snowflake is still a very strong company. The cloud services it provides will be essential to businesses going forward, and the dramatic selloff that has taken place this year appears to be an overreaction based on the company’s high valuation.
For investors willing to follow Buffett’s example of buying and holding great companies, Snowflake appears to be a prime deal at its current price.
Telecommunications giant Verizon (NYSE:VZ) combines excellent fiscal management with high prospects for future growth. Although it has not sold off the way Snowflake has, the stock is largely flat for 2022 so far. Verizon is also valued quite fairly, making it an inexpensive buy for its potential future gains.
Verizon benefited enormously from the rise of remote work. At the end of 2020, the company had a cash stockpile of over $22 billion, up from just $2.6 billion a year earlier.
The advent of 5G networks is also set to drive strong future growth for Verizon. 5G drove equipment sales up by nearly 35 percent in 2021. As more consumers adopt the new generation of telecommunications devices and upgrade to accompanying 5G plans, Verizon should see further increases in overall revenues.
Another appealing aspect of Verizon is its large and stable dividend. As of the time of this writing, Verizon shares yield 4.93 percent for an annual payout of $2.56. Considering dividend yields at the moment are quite low across the board, this higher yield offers a positive argument in favor of Verizon.
Over the next 12 months, analyst forecasts suggest Verizon will achieve a median target price of $58, up 11.8 percent from the current $51.89 trading price. This is obviously quite modest compared to Snowflake’s potential upside. It’s important to keep the company’s dividend in mind, however, as the payout will bolster total returns.
Finally, it’s worth noting that Verizon appears to be a rather good value at its current price. The company’s P/E ratio stands at just 9.55, much lower than the industry average of 26.97.
Cash flow per share is also quite good at $9.19 against an average of $3.78 for the industry. Taking this valuation into account, Verizon is a good buy at the moment.
Like most technology companies, Amazon (NASDAQ:AMZN) has encountered headwinds in the early months of 2022. The stock has sold off by 13.4 percent YTD, arresting the meteoric share price growth that had previously defined the company. This fact notwithstanding, there’s still a lot to like about Amazon over the next several years.
Aside from its obvious dominance in the eCommerce space, Amazon has also benefited from investing in its cloud computing division, AWS. In 2021, cloud revenue jumped by 40 percent and accounted for 74 percent of Amazon’s operating income. AWS is the largest player in the cloud computing marketplace with a market share of about 33 percent.
Lagging only slightly behind AWS in terms of growth was the company’s advertising segment, which posted a gain of 32 percent in 2021. This growth will eventually allow Amazon to compete with companies like Meta and Alphabet for ad revenue.
Analyst forecasts offer a wide range of possible outcomes for Amazon stock over the next 12 months, but the consensus opinion is broadly positive. The stock’s median price target stands at $4,040, a gain of 40.1 percent from the current price. The lowest target price of $2,590 has the stock losing 10.2 percent. While this suggests a somewhat risky year for the stock, it appears that the scales are tipped in favor of higher overall prices.
With strong growth in cloud services and advertising, a favorable stock forecast and its massive eCommerce business, Amazon is a company that still has much to offer investors. There’s every possibility that Amazon will underperform its price target this year, especially if consumer goods sales ease due to mounting inflation. Over the long haul, however, this company is still an excellent investment.
For all of these companies, the key to success will be patience. Stocks that end up in Warren Buffett’s portfolio are always assumed to be long-term propositions. If you’re willing to buy and hold these stocks over many years, you should be rewarded with solid returns.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.