close
close

Voice News

CA News 2024

searchengine

Three Warren Buffett stocks to buy by hand in May

The Oracle of Omaha’s picks continue to be among the market’s best-performing long-term stocks. Feel free to borrow some of his ideas.

Are you looking for new stocks to buy but don’t know where to start? Do not worry. Let a proven stock picker do the legwork for you. Warren Buffett will do just fine. After all, he is not called the Oracle of Omaha for nothing.

Here’s a look at three of Buffett’s larger holdings Berkshire Hathaway that would probably belong in your portfolio too.

bank of America

Investors may be a bit wary of owning bank stocks right now. The sector is on the defensive, experiencing rising loan defaults and delinquencies, while at the same time seeing tepid demand for other banking services. bank of America (BAC 1.00%) is no exception to this trend.

However, there’s a reason why BofA shares have been rising since the bank reported its first-quarter earnings in mid-April, renewing the rally that started in October and took the stock to a new 52-week high last week. That reason? Almost all the problems now facing banking are temporary and may even be disappearing.

Take corporate fundraising and mergers and acquisitions (mergers and acquisitions) as an example. This company hit a wall in 2022 and 2023 after a robust 2021. It is now showing signs of new life. Figures from Dealogic show that total mergers and acquisitions rose 30% year-on-year in the first quarter of 2024, pushing total investment banking costs up 14% over the same three-month period. Bank of America’s first-quarter investment banking revenues improved 27%.

It is expected that this company will continue to grow in the future, after successful IPOs, among others Reddit And Astera Labs. As investment management executive Baird put it, β€œan M&A recovery is upon us.”

However, it’s not just an uptick in M&A or IPOs that makes BofA an attractive prospect. It’s the economic tailwind behind This recovery will likely drive new demand across all of Bank of America’s profit centers. Meanwhile, credit scoring technology company VantageScore says loan delinquencies fell last month, the first drop since May 2021. The average credit score also improved.

This implies that people get a better grip on their debts. That bodes well for lenders like BofA, which experienced a measurable increase in loan write-offs last quarter. These write-offs could be as bad as the situation for the bank’s loan portfolio will be this cycle.

Berkshire, by the way, owns just over a million shares in BofA, making it the fund’s second-largest transaction.

Coca-Cola

Warren Buffett is not only a big fan of the product (he reportedly drinks as many as five cans of soda with the same name every day). He is also a major shareholder The Coca-Cola Company (KO 0.29%). Berkshire owns nearly $25 billion worth of shares in the soft drink giant, a position it has held for a long time. long time.

It’s not hard to figure out why. Coca-Cola is simply a great company. The organization has been brilliantly marketing its products and brand names for decades, making them a lifestyle choice that we often purchase without even thinking about other options. It’s such a popular name and logo that you often see it on clothing, home furnishings, toys and more. Indeed, it is not an exaggeration to suggest that the name Coca-Cola is sewn into the fabric of our culture.

However, Buffett’s interest in the company is much more pragmatic. Coca-Cola’s firepower in branding and marketing is just a means to an end. And that goal is cash flow – an increasingly large part of it.

KO Business Income Chart (TTM).

KO Business Income Data (TTM) according to YCharts

While there are faster growing companies, not many are growing as consistently as Coca-Cola has been able to improve its bottom line. This earnings growth in turn supports an ever-growing dividend. In this spirit, The Coca-Cola Company recently increased its annual dividend payment for the 62nd year in a row. The current dividend yield is 3.1%.

Understand that Coca-Cola is primarily an income stock. But what an income share it is, and will likely remain so for years to come!

Visa

Last but not least: add a credit card intermediary Visa (F 0.33%) on your list of Warren Buffett stocks to buy hand over fist in May.

If you’ve been following for a while, you probably know that Visa stock has been falling since late March. Even the recent earnings figures for the second quarter of the fiscal year were not enough to push the stock out of its downward trend. It also wasn’t the company’s decision not to lower full-year guidance, as some investors expected. Visa still expects revenue growth to be in the low double digits for the remainder of the year, in line with year-to-date results.

Either way, the stock is falling. Consider concerns about new credit card regulations, which limit the size of late fees that card issuers can charge. Record-breaking credit card balances don’t help either, as they seemingly leave the company less room for growth. Then there’s the upcoming merger of rivals To discover And Capital Onewhich will make for a more formidable competitor.

However, these concerns are all more bark than bite. Visa has weathered greater challenges. And it will do so again, this time by capitalizing on its strengths such as innovation in payments technology and its vast reach. Visa processes a market-leading 40% of the world’s card-based transactions. It matters simply because it is much easier to stay in the lead than to take the lead.

Berkshire owns just over 8 million Visa shares, which together are worth $2.2 billion. That’s not huge compared to the size of his positions in Coca-Cola or Bank of America. But it’s still telling that Buffett has been willing to continue strengthening this position for a decade now.

Bank of America is an advertising partner of The Ascent, a Motley Fool company. Discover Financial Services is an advertising partner of The Ascent, a Motley Fool company. James Brumley has no position in any of the stocks mentioned. The Motley Fool holds and recommends Bank of America, Berkshire Hathaway, and Visa. The Motley Fool recommends Discover Financial Services. The Motley Fool has a disclosure policy.