Warren Buffett has mentored Berkshire Hathaway To overwhelming returns to the market during good times and bad, the investment conglomerate Oracle Omaha has now generated a total return of approximately 3.5% annually to date. This may not sound like much, but it’s impressive considering that Standard & Poor’s 500 The return level of the index decreased by 15% in 2022.
With the hat-tip of an impressive mojo Buffett in the market, a panel of Motley Fool investors has identified three big stocks in Berkshire’s portfolio that have what it takes to deliver a great performance. Read on to find out why they are selected Amazon (AMZN 5.73%)And Kroger (K -1.53%)And apple (AAPL 3.19%) As a stock that can help you crush the market in the long run.
Incredible company at a great price
Keith Noonan (Amazon): The market has fallen out of love with Amazon. Some of this is due to investors fleeing growth stocks in search of safer options amid risk factors including higher interest rates, rising inflation, and other sources of macroeconomic uncertainty.
With heavy technology Nasdaq Composite The index is down nearly 25% this year alone, there’s definitely a broader shift in the game, and it’s not shocking to see Amazon stock affected by this trend. There were also some individual and company-specific catalysts that led to the sell-off, and Amazon shares are now down nearly 43% from last year’s high.
After a surge in demand caused by conditions linked to the pandemic, Amazon’s e-commerce business is now growing at a much slower pace. To make matters worse, the company is also seeing an increase in segment expenditures due to rising freight costs and other inflationary pressures. These factors alone may be enough to drive some investors away from the stock, but Amazon is also in the midst of a huge spending rush to expand its infrastructure and improve its technology resources.
In short, there is a perfect storm of catalysts leading to huge losses in e-commerce right now, and it is hurting the company’s overall profitability. On the other hand, the long-term outlook for Amazon’s online retail sector remains incredibly promising, and the cloud services business is fantastically profitable and continues to grow at an impressive rate.
With near-term business headwinds and market volatility currently shaping sentiment on stocks, long-term investors have a chance to build positions in one of the best companies in the world at a great price.
When in doubt, push a pawn
James Bromley (Kroger): A pawn is a soldier who introduced the chessboard. They can’t do much, but there are plenty of them, and they serve their purpose. The cliché “when in doubt, push a pawn” is just a clever way of saying when you don’t know what move to take, moving a pawn forward is a relatively low-risk decision that might end up helping a bit.
The Kroger Company is a proverbial pawn. The grocery business is neither high growth nor high profit, but it is the type of business that does the same in any environment. Inflation is not even a major stumbling block for the industry, as higher prices can pass on to consumers who have to eat.
To that end, know that Kroger stock is doing surprisingly well against a bearish background. The stock is up 20% since the end of last year while the S&P 500 is down 15%, in large part because investors — with few other options to count on — are looking for reliable FMCG names. If this economic malaise continues, there is no reason to believe that Kroger shares will not continue to outperform.
Grab your favorite Buffett meal
Daniel Foelber (apple): At first glance, Apple doesn’t look like the kind of company that Buffett fancy. After all, Berkshire Hathaway holdings tend to be valuable stocks with solid foundations and safe cash flows. But more than 38% of Berkshire’s public stock portfolio is in Apple stock. And for good reason.
Apple may be a technology company. But its business model is, in many ways, much like a FMCG company. Smartphones and high-performance computers have become a staple of consumers in today’s society. And for many people, tablets and wearables like smartwatches and AirPods are essential products too.
What sets Apple apart from other companies is its ability to increase its overall reach, retain existing customers, and increase customer spend year after year through increased pricing and new product offerings. For many customers, switching from Apple to competing products isn’t even a question because Apple integrates its consumer technology better than any company in the world.
Moreover, Apple has been able to increase profits and buy back shares at such a rapid pace that its shares are still inexpensive even though they have increased by more than 600% in the past 10 years. Down more than 20% from its high, Apple has a price-to-earnings ratio of less than 24 and is the only US company with a 12-month arrears net income of more than $100 billion. Apple has growth, its stock is good value, it makes a lot of money, and it dominates its industry.
Apple sales will likely slow in a recession as consumers resist upgrading to the latest. But even as its business slows – Apple will still be poised to make a huge profit and use the excess money to buy back its stock. Given rising interest rates, fears of a recession and persistent inflation, it’s hard to think of a tech stock that is safer than Apple.