3 Warren Buffett Stocks To Buy

Warren Buffett bought his first stock at the age of 11. Now, at the age of 91, he is widely considered one of the best investors of all time. Buffett’s holding company, Berkshire Hathaway, has delivered average annual returns of 20 percent per year since Buffett took the helm in 1965. Total returns since that year exceed 3,300,000 percent. That is far higher than indexes like the S&P 500. 

When COVID caused the market to crash in March 2020, Berkshire Hathaway stock dropped along with everything else. As some industries started to recover, tech-heavy funds like Cathie Wood’s ARK Invest family of ETFs saw tremendous gains. Less exotic, value-focused companies like Berkshire Hathaway couldn’t keep up. 

Some analysts started to wonder whether Warren Buffett had lost his magic touch now that the world has gone digital. As it turns out, they couldn’t have been more wrong.

Once the world grew accustomed to pandemic life, tech stocks stabilized – and in some cases, corrected. Meanwhile, the consumer staples and financial service providers that make up the lion’s share of Berkshire Hathaway’s portfolio regained their footing and began trending up again. 

At last count, Berkshire Hathaway Class A stock is up nearly eight percent year-to-date – and just over 24 percent for the past 12 months. Berkshire Hathaway Class B stock has realized similar gains. Conversely, Cathie Wood’s ARK Innovation ETF is down almost 43 percent year-to-date and more than 56 percent for the past 12 months. 

Clearly, Buffett’s steady focus on long-term returns and his value-based investment strategies are working. These are three Warren Buffett stocks to buy now. 

Is Amazon Stock A Buy? 

Warren Buffett wasn’t part of Amazon’s early growth. He started building Berkshire Hathaway’s position in the company in 2019 – a delay he now says he regrets. He is convinced that Amazon will continue its runaway success. If so, now is the time to buy.

Amazon (AMZN) was made for quarantines and stay-at-home orders. The online shopping giant saw tremendous growth as consumers turned away from brick-and-mortar stores during the pandemic. On top of that, its market-leading cloud-computing service provided critical infrastructure for the work-from-home and learn-from-home transition.

The most drastic COVID-inspired lifestyle changes are no longer a must, so the trend towards online shopping and the adoption of cloud computing has slowed somewhat. However, Amazon’s digital advertising unit is taking off, which is making up some of the difference in new revenue. 

Amazon has come down in price over the past year, primarily because the wild growth that occurred through the pandemic was unsustainable. Some investors were discouraged when recent quarters couldn’t surpass the results of the prior year. That, coupled with a general decline in the tech industry, has Amazon stock down approximately 15 percent year-to-date. However, that decline is likely temporary, and most agree Amazon stock will go up long-term. 

Better still, Amazon announced a 20 for 1 stock split to be effective in early June. That will bring Amazon’s high share price down to more reasonable levels and increase accessibility for retail investors. Historically, such splits have prompted renewed interest and boosted stock prices. In other words, Amazon stock is a buy.  

Will Bank of America Stock Recover?

Warren Buffett has been a longtime Bank of America investor, and BAC stock makes up nearly 13 percent of the total Berkshire Hathaway portfolio. That’s Berkshire Hathaway’s second-largest holding – the only company Buffett is more excited about than Bank of America is Apple. 

Bank of America (BAC) checks all the boxes for value investors. It’s a fundamentally solid company that keeps a steady pace through ever-changing economic conditions. Bank of America’s reliable dividend adds to its appeal. The annual dividend yield currently stands at 2.08 percent. 

For those considering Bank of America stock, a more important issue is whether Bank of America stock will go up in 2022. After all, share prices increased significantly in 2021 – roughly 47 percent – which was particularly impressive considering the S&P 500 gained 27 percent for the year. Can Bank of America stock keep up that rate of growth? 

So far, 2022 hasn’t been quite so kind to Bank of America. Certainly, it started off looking promising. The stock price briefly exceeded $50 per share in mid-February, and at the time, some analysts suggested it could hit $66 per share over the next 12 months. Unfortunately, that optimism didn’t account for the Russian invasion of Ukraine. 

The Russian invasion of Ukraine has been particularly challenging for the financial sector. As a result, Bank of America stock went down about 15 percent in the first few weeks of the conflict. However, the same is true of other US financial institutions. JPMorgan Chase stock also declined approximately 15 percent in the same period. Wells Fargo and Citigroup saw slightly larger drops. 

While the full ramifications of economic sanctions against Russia and increased oil prices are not yet known, the fact is that no one doubts Bank of America stock will recover. The timing is unclear, but that’s okay from a value investing perspective. When it comes to Bank of America stock, buy the dip and plan to hold these shares long-term. 

Does UPS Have A Moat? 

UPS stock doesn’t make up a large percentage of Berkshire Hathaway’s portfolio, but a review of its financials, management, moat, and overall business design makes it easy to see why Warren Buffett is a fan. 

For example, one of the biggest bits of news from the most recent earnings call was the company’s 2022 guidance – specifically, the fact that UPS projects a 13.7 percent operating margin from revenue of $102 billion. While this figure represents a drop in the rate of revenue growth, it indicates greater profitability. That’s a win. 

On top of that, the company’s 2021 return on invested capital (ROIC) was 30.8 percent in 2021, and it is expected to be above 30 percent again in 2022.

ROIC is an indication of how efficiently an enterprise is using its capital to generate profit. Considering 2021’s average ROIC across the market was just over six percent, it is clear that UPS is doing a lot of things right. 

Other positive factors in UPS’s favor include its commitment to shareholders. At the moment, the annual dividend yield is 2.9 percent – a significant increase that was announced in early February. Better still, UPS trades at a low price-to-earnings ratio of 13.89, which many analysts believe is a bargain. 

Finally, though other shipping companies have attempted to pull market share from UPS, they simply can’t make a dent. It’s too hard to duplicate the complex infrastructure required to deliver letters and packages around the world quickly. UPS is by far the largest courier service in the world with a market cap of $177.47 billion. 

Second on the list is Germany’s Deutsche Post, which has a market cap of $58.33 billion. FedEx trails behind in third place, with a market cap of just $56.49 billion. In other words, there is no risk that another company will come along anytime soon to challenge UPS’s revenue and profitability. That’s one of the many reasons UPS stock is a buy. 

Warren Buffett Stocks To Buy: The Bottom Line 

Amazon, Bank of America, and UPS are all solid choices for investors interested in adopting a long-term value strategy. Other interesting Warren Buffett stocks include American Express, Coca-Cola, General Motors, Nu Holdings, and Snowflake. 

If the time and research necessary to create a diversified portfolio that balances assets by industry, market cap, and so forth are more than you care to invest, don’t worry. There is a simple solution. Berkshire Hathaway Class B shares are designed to be affordable for retail investors. Adding them to your portfolio gives you instant access to all of the Warren Buffett stocks. 

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