In this article, we discuss the 10 best stocks to buy according to Warren Buffett. If you want to skip our detailed analysis of these stocks, go directly to the 5 Best Stocks to Buy According to Warren Buffett.
Warren Buffett, the chief of Berkshire Hathaway, was one of the biggest winners during the financial crisis of 2009. As speculation, asset bubbles, and the dangers of using leverage once again come to the fore, many investors are looking to mimic the investing strategy that Buffett deployed during the crisis to profit from it. Back in 2010, Buffett had praised the Federal Reserve and the Treasury for acting quickly in order to prevent the collapse of the banking system. As inflation reaches record highs in 2022, the Fed appears somewhat less certain.
There has been a massive exodus from growth stocks as a looming interest rate hike pushes investors towards value plays, even though some experts have criticized the Fed for waiting too long to raise rates. The thoughts of Buffett can shed some light on navigating a market slowdown. During an interview with the Financial Crisis Inquiry Commission in 2010, the billionaire underlined that the “important decision” in evaluating a business was the pricing power. He added that he did not buy stocks for returns but rather for the “business” that the stock offered.
Some of the prominent stocks in the Berkshire Hathaway portfolio at the end of the fourth quarter of 2021 included Apple Inc. (NASDAQ:AAPL), American Express Company (NYSE:AXP), and Bank of America Corporation (NYSE:BAC), among others discussed in detail below.
Our Methodology
The stocks were picked from the fourth quarter regulatory filings of Berkshire Hathaway. The hedge fund sentiment around each stock was calculated using the data of 867 hedge funds tracked by Insider Monkey.
Best Stocks to Buy According to Warren Buffett
10. The Bank of New York Mellon Corporation (NYSE:BK)
Number of Hedge Fund Holders: 46
The Bank of New York Mellon Corporation (NYSE:BK) provides financial products and services. Top hedge funds hold bullish positions in the company. At the end of the third quarter of 2021, 46 hedge funds in the database of Insider Monkey held stakes worth $4.6 billion in The Bank of New York Mellon Corporation (NYSE:BK).
Latest filings show that Berkshire Hathaway owned over 72 million shares of The Bank of New York Mellon Corporation (NYSE:BK) at the end of December 2021 worth $4.2 billion, representing 1.26% of the portfolio. The fund registered no new activity around the company during the quarter.
Just like Apple Inc. (NASDAQ:AAPL), American Express Company (NYSE:AXP), and Bank of America Corporation (NYSE:BAC), The Bank of New York Mellon Corporation (NYSE:BK) is one of the stocks that elite investors are buying.
In its Q3 2020 investor letter, First Eagle Investment Management, an asset management firm, highlighted a few stocks and The Bank of New York Mellon Corporation (NYSE:BK) was one of them. Here is what the fund said:
“The world’s largest custody bank, Bank of New York Mellon has been challenged by the persistently low-rate environment. While custody tends to be a wide-moat business, revenue generation is highly sensitive to net interest margins. Low rates have also hurt Bank of New York’s other primary line of business—investment management—as it has been forced to waive fees on its money market funds to preserve their net asset value.”
9. Chevron Corporation (NYSE:CVX)
Number of Hedge Fund Holders: 51
Chevron Corporation (NYSE:CVX) is an integrated oil and gas firm that operates from California. Securities filings reveal that Berkshire Hathaway owned over 38 million shares of Chevron Corporation (NYSE:CVX) at the end of the fourth quarter of 2021 worth $4.4 billion, representing 1.35% of the portfolio. The fund increased its stake in the firm by 34% compared to filings for the third quarter.
There is positive hedge fund sentiment around Chevron Corporation (NYSE:CVX). At the end of the third quarter of 2021, 51 hedge funds in the database of Insider Monkey held stakes worth $4.4 billion in Chevron Corporation (NYSE:CVX), up from 50 in the preceding quarter worth $4.2 billion.
In its Q3 2021 investor letter, Goehring & Rozencwajg Associates highlighted a few stocks and Chevron Corporation (NYSE:CVX) was one of them. Here is what the fund said:
“After successfully replacing 25% of Exxon’s board of directors despite owning just 0.02% of the outstanding equity, Engine No. 1, the climate-focused activist hedge fund, met with Chevron’s management late last summer. In discussions that were later described as “cordial,” Chevron executives shared their plan to reduce carbon emissions. Subsequently, Chevron announced new plans to further reduce carbon output, along with their intention to appoint a new director with “environmental expertise.” Although it remains unclear exactly what Engine No. 1 is planning, rumors suggest the fund has contacted other investors, strongly suggesting they intend to launch a second campaign in the not-too-distant future.
What should Chevron expect?
It was recently reported by The Wall Street Journal that Exxon was considering abandoning two massive natural gas projects: the 75 trillion cubic foot (tcf ) Rovuma LNG project (capital cost $30 bn) and the 5 tcf Ca Voi Xanh offshore-Vietnam gas project (capital cost $10 bn). Exxon board members (most likely including the three supported by Engine No. 1) have publically expressed concerns about both projects. According to internal reports, these projects are among the highest CO2 producers in Exxon’s pipeline; it is no surprise these projects have been called into question. However, we find the plight of both fields to be perplexing since production would almost certainly be used to displace coal in electricity generation, cutting CO2 emissions by nearly 50%. This fact seems to be lost on the new Exxon board members.”
8. U.S. Bancorp (NYSE:USB)
Number of Hedge Fund Holders: 42
U.S. Bancorp (NYSE:USB) is a financial services holding firm. Hedge funds have been piling into the stock in recent months. At the end of the third quarter of 2021, 42 hedge funds in the database of Insider Monkey held stakes worth $8.39 billion in U.S. Bancorp (NYSE:USB), up from 41 the preceding quarter worth $8.30 billion.
According to the latest data, Berkshire Hathaway owned more than 126 million shares of U.S. Bancorp (NYSE:USB) at the end of December 2021 worth $7.1 billion, representing 2.14% of the portfolio. The fund registered no new activity around the stock during the fourth quarter.
In its Q4 2020 investor letter, Mairs & Power, an asset management firm, highlighted a few stocks and U.S. Bancorp (NYSE:USB) was one of them. Here is what the fund said:
“On the negative side, one of the Fund’s biggest detractor in 2020 was U.S. Bancorp (USB). Like all banks, U.S. Bank was hurt by the difficult interest rate environment and credit cycle concerns. We believe banks are strong enough to survive the current sector doldrums, and they remain some of the market’s most attractive opportunities.”
7. Verizon Communications Inc. (NYSE:VZ)
Number of Hedge Fund Holders: 57
Verizon Communications Inc. (NYSE:VZ) provides technology and communications services. Berkshire first bought a stake in the company during the first quarter of 2021. This holding was sold off entirely by late 20016. Buffett opened a new position in the company in the third quarter of 2020. That stake was more than tripled in the coming quarters. At the end of December 2021, the fund owned over 158 million shares in Verizon Communications Inc. (NYSE:VZ) worth $8.2 billion, representing 2.49% of the portfolio.
Elite hedge funds continue to hold large stakes in Verizon Communications Inc. (NYSE:VZ). At the end of the third quarter of 2021, 57 hedge funds in the database of Insider Monkey held stakes worth $10.3 billion in Verizon Communications Inc. (NYSE:VZ), compared to 63 in the previous quarter worth $10.9 billion.
In its Q1 2021 investor letter, Miller/Howard Investments, an asset management firm, highlighted a few stocks and Verizon Communications Inc. (NYSE:VZ) was one of them. Here is what the fund said:
“We sold Verizon (VZ) based on concerns over how much they might spend in ongoing spectrum auctions. Management may legitimately view spending billions of dollars to expand their spectrum holdings as necessary, but we believe the payoff will be slow and will make it challenging to grow the dividend at a good pace.”
6. Moody’s Corporation (NYSE:MCO)
Number of Hedge Fund Holders: 58
Moody’s Corporation (NYSE:MCO) operates as an integrated risk assessment firm. Wall Street is exceedingly bullish on the stock. At the end of the third quarter of 2021, 58 hedge funds in the database of Insider Monkey held stakes worth $15.6 billion in Moody’s Corporation (NYSE:MCO), up from 44 in the previous quarter worth $16 billion.
Regulatory filings show that Berkshire Hathaway owned more than 24 million shares of Moody’s Corporation (NYSE:MCO) at the end of the fourth quarter of 2021 worth $9.6 billion, representing 2.91% of the portfolio.
In addition to Apple Inc. (NASDAQ:AAPL), American Express Company (NYSE:AXP), and Bank of America Corporation (NYSE:BAC), Moody’s Corporation (NYSE:MCO) is one of the stocks that institutional investors have their eye on.
In its Q4 2020 investor letter, Baron Funds, an asset management firm, highlighted a few stocks and Moody’s Corporation (NYSE:MCO) was one of them. Here is what the fund said:
“Moody’s Corporation provides credit ratings, financial intelligence, and analytical tools to assist businesses in making decisions. Moody’s reported excellent financial results due to continued growth in rated debt issuance. However, the stock detracted on investor expectations that issuance trends will moderate into 2021.The announced retirement of long-time CEO Ray McDaniel may have also weighed on sentiment. We continue to own the stock due to our views of the company’s long runway for growth and strong competitive advantages.”
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Disclosure. None. 10 Best Stocks to Buy According to Warren Buffett is originally published on Insider Monkey.
