3 Buffett Stocks To Buy When Market Falls

Buffett Stocks To Buy When Market Falls: Warren Buffett’s holding company, Berkshire Hathaway (BRK.A), is widely considered one of the best stocks for uncertain economic times. It’s not because Buffett is infallible or Berkshire Hathaway always beats the market – neither is true.

It’s because Warren Buffett’s investment philosophy is designed to build wealth over time. Though Berkshire Hathaway stock has its ups and downs like any other security, the company has always come out on top over the long term.

Since Berkshire Hathaway stock started trading publicly, it has returned nearly 6,500 percent. That’s a compound annual return above 20 percent – roughly double the compound annual return of the S&P 500.

Buffett doesn’t jump into promising IPOs or risky growth stocks. He waits and watches. When a company demonstrates that it has a strong product, effective management, and financial health, he buys – but even then, he only buys if the shares are available at a reasonable price.

These are three Buffett stocks that meet his investment criteria in terms of product, management, and financial strength. While they aren’t immune to today’s volatile conditions, they can be relied upon to weather the storm and emerge fully intact when the world economy begins to settle down.

Is Buffett Buying More Apple?

If there is one stock Warren Buffett believes in above all others, it’s Apple (AAPL). Berkshire Hathaway’s stake in the tech giant is just over five percent, and Apple shares make up more than 38 percent of Berkshire Hathaway’s total investment portfolio.

Every time Apple stock dips, Buffett buys more. In a May 2022 13F filing, Berkshire Hathaway disclosed the purchase of an additional 3.8 million shares during a brief downturn Apple stock experienced in the first quarter.

The interesting thing about Buffett’s passion for Apple is that, on the surface, it doesn’t seem like a company that matches Buffett’s investing strategy.

He tends to stay away from tech, focusing instead on financial service providers and consumer staples. However, Apple isn’t exactly a tech company, though its products fall squarely into the tech space. It functions more like a retailer that offers the latest in smart devices.

While no one is ready to call smartphones a consumer staple, the fact is that a majority of the population considers them a must-have. Smart devices make the internet accessible without a computer, and that’s a must for many aspects of day-to-day life in developed countries.

Better still, Apple has a lengthy menu of products and services that integrate with iPhones and iPads. That includes wearables like AirPods and smartwatches, as well as smart home devices. Apple is rolling out an extensive list of complementary services like Apple News, Apple Music, and Apple TV to increase revenue and deepen customer relationships.

It’s true that there are other smartphone companies that have loyal customer bases – and often larger customer bases – but even those consumers agree that Apple’s technology is superior. It’s the high Apple price tag that they object to, and that objection tends to break down eventually. Consumers are far more likely to switch to Apple from another platform than they are to leave Apple for another platform.

Apple’s earnings never seem to stop growing, yet Apple stock is not overpriced. Since its IPO, Apple shares have returned 242,200 percent, though growth has slowed considerably in the past five years. The company’s current pace is sustainable, and Apple has all of the cash it needs to ride out a market decline comfortably. That makes Apple stock a buy.

Is It Worth Investing In Amazon?

On June 6th, Amazon shares began trading at a new low price after completing a 20-to-1 stock split, and investors couldn’t be happier. The reduced per-share price makes Amazon stock more accessible for retail investors, which is likely to push demand up.

Meanwhile, Amazon (AMZN) still has all of the same advantages that made it a contender for Warren Buffett’s portfolio. It has multiple revenue streams, all of which are growing, and it is carefully planning for a successful future through massive infrastructure projects.

Amazon had an extraordinary run during the pandemic when many consumers traded brick-and-mortar shopping for e-commerce. The company’s growth on the retail side wasn’t sustainable once life started getting back to normal, so recent results have given the impression that business is slowing down. Amazon stock has lost nearly 30 percent of its value since the start of the year.

However, though Amazon’s retail business isn’t showing the same exceptional results, the company as a whole is well-positioned to grow revenues both short-term and long-term.

Among other promising factors, Amazon Web Services (AWS) remains the market leader in cloud computing, and its operating income continues to climb. Better still, AWS has plenty of room to expand further, which promises to improve the company’s overall top and bottom-line results.

Meanwhile, Amazon is building out its digital advertising business, which is likely to bring in plenty of cash once it is fully operational. Amazon’s advertising revenue grew 23 percent in the first quarter alone, and it has barely started its rollout.

All of these factors make Amazon shares an obvious choice for Warren Buffett, but the biggest selling point is the stock’s low price. It is currently trading around 20 times its projected operating cash flow for 2022, which is on the low end of where the stock has traded over the past five years.

As of the end of first quarter 2022, Berkshire Hathaway owned 533,300 shares of Amazon. 

Is Verizon Stock A Buy?

Verizon (VZ) isn’t as glamorous as its tech peers, and it doesn’t bring in tremendous returns regardless of market conditions. Instead, it is a stable, steady company that can be relied upon to put shareholders first with a 5.04 dividend yield – a quality that Warren Buffett prizes.

Verizon has made it a point to prioritize its shareholders by increasing its dividend payout annually for the past 15 years. While it hasn’t hit Dividend Aristocrat status yet – that takes 25 consecutive years of increases – most industry experts suspect that Dividend Aristocrat status is one of Verizon’s goals.

That’s important because one of Verizon’s biggest rivals, AT&T, just lost its Dividend Aristocrat status. Now that the damage is done, AT&T will have an easier time decreasing dividends going forward, while Verizon still has an incentive to increase its payments.

Aside from its dividend, Verizon has a quality product that falls into the utility sector. JD Power has recognized Verizon’s network quality for 28 years, which makes it a consumer favorite. Verizon is investing in its network to retain its status as best-in-class for quality. In 2021, the company put $53 billion into its C-band network, which is more than twice AT&T’s investment.

Finally, Verizon is the market leader when it comes to network-as-a-service (NaaS), which is the future of connectivity. When autonomous cars and other Internet of Things (IoT) devices need a network, NaaS will be there to provide it. That makes Verizon stock a buy.

Buffett Stocks: The Bottom Line

Matching Berkshire Hathaway’s portfolio or attempting to duplicate Warren Buffett’s trades isn’t possible, but investors do have the option of studying Buffett’s investing strategy and implementing its principles. That begins with identifying high-quality companies, then buying those that are trading below their intrinsic value.

Alternatively, it is possible to let Buffett do the trading by investing in Berkshire Hathaway stock directly. While Berkshire Hathaway Class A shares are out of reach for most people, Berkshire Hathaway Class B shares offer similar returns at a practical price point.

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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.