Nowadays, it’s very popular for younger investors to get their advice on social media forums or from YouTube financial gurus. To me, it sounds like the blind leading the blind. Every year, a new hotshot claims to have the inside path to profitable stocks to buy. And more often than not, the market eventually blindsides them. That’s why folks should listen to those who’ve been there before like Warren Buffett.
For one thing, Warren Buffett has been investing in blue-chip stocks since the birth of Christ. He’s lived through multiple economic and market cycles so nothing really surprises him. Yes, the individual stocks to buy may look different but in the end, it comes down to the free market principles of supply and demand. And one of the best teachers of profitability exploiting such dynamics is experience.
Yet we should realize that Warren Buffett was once young too. Born on Aug. 30, 1930, Buffett graduated from high school when he was 17 years old. He never intended to go to college. However, his father insisted that he attend the Wharton Business School at the University of Pennsylvania. But the younger Buffett only stayed two years, “complaining that he knew more than his professors,” according to The Balance contributor Joshua Kennon.
This sounds to me like Warren Buffett was the original YouTube guru. But the difference is that unlike all the junk that you see on the blogosphere, he knew what he was talking about. Eventually, he would amass a financial empire that would allow him to take control of Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B). If you read his bio, you’ll find that Buffett wasn’t just great at picking stocks to buy — he was a real OG.
In my view, if you’re going to learn from somebody, it should be a person like Buffett, a man who was born during the Great Depression, went through his youthful exuberance phase, formed a time-proven investment strategy and still continues to fight like the best of ‘em at 90 freaking years old! Below are some key stocks to buy from the holdings of Berkshire Hathaway.
- AbbVie (NYSE:ABBV)
- Amazon (NASDAQ:AMZN)
- American Express (NYSE:AXP)
- Charter Communications (NASDAQ:CHTR)
- Chevron (NYSE:CVX)
- Itochu Corporation (OTCMKTS:ITOCF)
- Verisign (NASDAQ:VRSN)
Now, I should note that despite my high praise for Warren Buffett, he’s not the ultimate arbiter of equity valuations: the market is. Even though these stocks to buy are compelling because they’re on the Berkshire list, nothing is infallible. Maintain money management discipline and a long-term prospective, though, and you should do well in the end.
Stocks to Buy: AbbVie (ABBV)
Berkshire Hathaway has a number of healthcare-related companies on its list. But the one that caught my attention was AbbVie. Yes, I have some personal bias in that I’ve discussed the bullish case for ABBV stock. But well beyond that, I like to think that Warren Buffett and I are on the same wavelength — well, at least as long AbbVie specifically is concerned.
Yes, everybody knows AbbVie as one of the giant pharmaceutical stocks to buy. It’s perhaps most popular for the drug Humira, which has been formulated to treat rheumatoid arthritis, Crohn’s disease and psoriasis, among many other conditions. As well, AbbVie features an extensive list of oncology-related solutions. Should the novel coronavirus outbreak fade out completely, the treatment for long-term diseases should take precedence based on pent-up demand, if you will.
But what may really drive ABBV stock is Botox, which came under the AbbVie umbrella when it acquired Allergan. During the Covid-19 lockdowns, there was little incentive to look good. Now that we’re slowly but surely returning to our normal schedules, we have a “right” to be vainer. Cynically, this is good news for ABBV, making it one of the best Berkshire-held stocks to buy.
Admittedly, Berkshire doesn’t have nearly as much allocation toward Amazon shares as it does many of its other holdings. At only a 0.1% stake, it’s not Buffett’s highest-conviction trade, that’s for sure. Still, a 0.1% stake is a non-zero number, which means AMZN is one of the stocks to buy or at least to consider.
I’m going to get the bad stuff out of the way. Certainly, you can’t deny that AMZN stock has a PR problem. Back during the early days of the Covid-19 crisis, many workers demanded basic dignities, such as paid time off for employees who were sick or displayed Covid-19 symptoms. Not helping matters is that Amazon founder Jeff Bezos consistently swapped places with elite tycoons as the richest person in the world.
Yeah, we can talk all day about free market capitalism but come on — sometimes enough is enough.
Still, despite the troubles, Amazon’s relevance can’t be denied. When the brick and mortars had to shut down based on government mandates, e-commerce filled the gap. And Amazon dominates e-commerce.
While the percentage of e-commerce sales relative to total retail sales has come down since the peak of the crisis, it’s still very much elevated from pre-pandemic norms. I don’t see this reversing anytime soon, which is why Berkshire includes it on its list of stocks to buy.
Stocks to Buy: American Express (AXP)
For me, American Express represents a perhaps delusional notion that in certain circumstances, Warren Buffett and I think alike. Generally speaking, I’m somewhat hesitant on credit cards. Certainly, I can see their appeal in the present context. Throughout most of last year, the Covid-19 crisis deflated consumer sentiment, which naturally boosted the personal saving rate.
Today, with much of the economy reopening, consumers are ready to spend. Further, you have the stimulus checks that former President Donald Trump and incumbent President Joe Biden signed off on. Thank you, gentlemen. But will such measures really boost spending holistically?
Sure, I get the narrative that spending will rise because Americans want to catch up on their retail therapy. But credit cards are debt instruments and consumers historically haven’t shown much restraint with debt instruments. But AXP stock may not suffer from such concerns as the underlying company caters to wealthier individuals.
It seems that the folks at Berkshire Hathaway understand this point very clearly. AXP features an 18.9% stake. In contrast, Mastercard (NYSE:MA) and Visa (NYSE:V) both have a 0.5% stake. So if you’re going to get Buffett-inspired credit card stocks to buy, go for American Express.
Charter Communications (CHTR)
A classic Warren Buffett move, the inclusion of Charter Communications by Berkshire Hathaway doesn’t surprise me in the least. As a telecommunications and mass-media company under the Charter Spectrum brand name, CHTR was one of the most relevant stocks to buy. Providing high-speed cable and fiber-internet access, along with mobile services, Charter is integral to our modern infrastructure.
But with the Covid-19 crisis, CHTR stock became even more ingrained. With millions of white-collar workers forced to operate out of their living rooms, reliable high-speed internet services commanded a premium. Not that it should bear any influence on whether you should acquire shares of Charter Communications but I personally made the switch to Spectrum and I couldn’t be happier.
While anecdotal, I’ll tell you what makes CHTR compelling among the Buffett-inspired stocks to buy. Yes, Spectrum’s coverage area spans 44 states. But it’s also where they dominate that matters. For instance, Spectrum has the widest coverage in California, Texas and New York. When you combine the GDP of these three states, you’re talking about $6.55 trillion of economic activity.
Such a combined entity would make it the third-biggest country in the world, usurping Japan. Thus, CHTR is sticking around, which is why Berkshire owns it.
Stocks to Buy: Chevron (CVX)
Chevron might be one of the surprising stocks to buy on the Berkshire Hathaway list, prompting criticism that perhaps Buffett might be losing it. As you know, American consumers have gravitated toward electric vehicles. And that’s not just a “fashion statement.” Millennials care about sustainability and growing evidence suggests that Generation Z is taking cues, increasing the magnitude of holistic awareness.
On the surface, CVX stock doesn’t seem to make much sense. Yes, Chevron and the big oil machinery are relevant today. But tomorrow, the tide will likely turn.
It’s not just millennials that consistently influence current affairs. More significantly, government leadership is also pivoting toward a cleaner, more sustainable future. Obviously, the Biden administration wishes to push its environmental protection agenda. Up and coming politicians will probably carry the torch. Big oil stocks to buy are done for.
Then again, maybe not. I think CVX may represent a case of Buffett’s contrarianism. This is speculation on my part but it’s possible that Buffett and the Berkshire team don’t view the electrification of transportation as economically viable just yet.
Even if it became so, Buffett probably recognizes that oil will be around for a very long time, in part due to the high energy density of fossil fuels. So yeah, CVX is a keeper.
Itochu Corporation (ITOCF)
I’m familiar with most of the stocks to buy under the Berkshire umbrella. But the name that caught me by surprise was Itochu Corporation. Frankly, I understand both value and growth investors pivot to Asia. However, this almost always means Chinese companies. On the other hand, Japan hasn’t been making much news aside from deflation-related headlines. So why Itochu?
If somebody would ask that question to Warren Buffett, I’d be most grateful as it would give us all a deeper insight into one of the world’s greatest investors. But if I had to guess, it would be Itochu’s exposure to world-class Japanese manufacturing. Itochu is one of Japan’s biggest general trading companies and thus touches on many relevant sectors. But the underlying theme is manufacturing.
Interestingly, Harvard Business Review did a story on Japan’s manufacturing prowess. Initially, business experts attributed its outperformance to superior methodologies. But later, these same experts noted that Japan’s production attributes were contradictory to commonly held beliefs: “…many Japanese factories practicing lean manufacturing appeared to surpass their U.S. counterparts on several dimensions; they achieved lower cost, higher quality, faster product introductions, and greater flexibility, all at the same time.”
In other words, there’s something in the water when it comes to Japanese manufacturing. Buffett might be recognizing this, thus explaining the inclusion of ITOCF stock.
Stocks to Buy: Verisign (VRSN)
Warren Buffett is old. But what I really appreciate about him is that he continues to defy stereotypes. Honestly, at 90 years old, he should be referred to in the past tense. But he’s still out there, leading one of the biggest companies in the world. Good for him and it’s a powerful lesson for all of us.
What I especially like is that Buffett isn’t just out there as a charity case. Instead, he’s making bold calls regarding stocks to buy, one of them being Verisign. Well before anyone knew about the SARS-CoV-2 virus, VRSN was an incredibly relevant idea due to its internet network infrastructure operations, including managing the registry for .com and .net domains. That’s serious influence right there.
But Covid-19 has dramatically changed the paradigm of work. Though many employees are heading back to the office, several organizations — including high-level blue chips — remain open-minded about a full return to normal. And a ton of them are not in a hurry to have everyone clocking back in.
There’s also the narrative that many folks who got a taste of the gig worker’s life want to maintain such freedom. To be fair, I’m not sure if companies will allow employees to work 100% from home. Therefore, we could see an increase in independent contract work, which should bolster Verisign’s business. Overall, VRSN stock is one to watch closely as we navigate the post-Covid world.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.