FNew investors have a flair for making money, just like billionaire Warren Buffett. Since becoming CEO of the conglomerate Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) in 1965, the Oracle of Omaha, as he is now known, created more than $610 billion in shareholder value and generated an overall return on his company’s Class A shares (BRK.A) of 3,641,613%, until December 31, 2021.
Even though Buffett isn’t infallible, riding his ponytails has been a proven recipe for surpassing the benchmark S&P500 for more than half a century.
As we enter the second half of what has been an exceptionally volatile and challenging year for investors, several Berkshire Hathaway holdings stand out as stunning stocks. The following three Warren Buffett stocks can all be bought with confidence in July.
Bank of America
The first Buffett stock just begging to be bought in July is the money center giant Bank of America (NYSE: BAC).
Usually, bank stocks are an industry to avoid when the broader market is mired in a double-digit decline. However, this time is different. It’s the first time the U.S. central bank has aggressively raised interest rates in a plummeting stock market.
Under normal circumstances, we would expect the Federal Reserve to lower interest rates to stimulate lending and support the US economy and stock market. This reduces the net interest income potential of bank stocks like BofA. But with the Fed raising its target federal funds rate by 150 basis points in the past three meetings alone, bank stocks are poised to benefit from a significant increase in net interest income.
Among major bank stocks, none is more interest rate sensitive than Bank of America. In April, when the company released its first quarter operating results, BofA noted that it would generate about $5.4 billion in additional net interest income with a parallel 100 basis point shift in the curve. interest rates. By the end of 2022, we could see a jump of 300 basis points (or more) in the fed funds rate.
Bank of America also benefited from its continued investment in technology and digitalization. In three years, the number of active digital users has increased by 5 million to reach 42 million. More importantly, 53% of all loan sales in the first quarter were made online or through a mobile app, compared to 30% in the comparable quarter of 2019. Digital sales are considerably cheaper for the company than online interactions. person or by telephone. . It is this digital push that has allowed BofA to consolidate some of its branches to reduce its non-interest expenses.
If you need one more good reason to go after Bank of America, take a closer look at its valuation. While most companies are likely to suffer a near-term earnings slump, BofA’s earnings per share could rise nearly 20% in 2023. With shares trading close to book value and around eight times forecast earnings from Wall Street for the coming year, Bank of America might just be the best bargain in Buffett’s entire portfolio.
A second Warren Buffett stock investors can confidently pick up in July is the gambling giant ActivisionBlizzard (NASDAQ: ATVI).
Like most tech stocks, Activision is trailed by a cloud of uncertainty. However, he has his own set of concerns beyond historically high inflation, the growing prospect of a national recession and rising interest rates shutting off access to historically cheap capital. In Activision’s case, it faced multiple lawsuits alleging discrimination and sexual harassment in the workplace.
To make matters worse, the company has delayed the release of a number of key games that are expected to attract new users to its ecosystem. First person shooter Monitor 2 and action role play Diablo IV have had their respective release dates pushed back to Q4 2022 and somewhere in 2023.
However, these snafus have arguably rolled out the red carpet for opportunistic investors. For example, the company’s dispute should be resolved soon.
Activision ended March with 372 million monthly active users (MAUs). Although down from a year ago, MAUs linked to its King subsidiary, headquarters of candy Crush, held up particularly well. Upcoming key game releases in the second half of 2022 and 2023 are expected to reinvigorate MAU growth in the Activision segment.
Even more important is the fact that Microsoft (NASDAQ: MSFT) made a cash offer of $68.7 billion to acquire Activision Blizzard at $95 per share. In addition to becoming even more influential in the gaming space with this deal, Microsoft plans to use Activision as a launch point to further its metaverse ambitions. The Metaverse is the next iteration of the Internet, allowing connected users to interact with each other and their surroundings in virtual 3D worlds.
So far, it doesn’t appear that Activision and Microsoft have run into any issues with US regulators over the deal. This is notable given that Activision Blizzard shares ended last week below $78 per share. If Microsoft completes this deal in 2022, as expected, Activision shareholders could take advantage of a quick 22% arbitrage opportunity. This is precisely why Warren Buffett’s company bought a roughly 9.5% stake in Activision.
A third and final Warren Buffett stock to buy in July is the automaker General Engines (NYSE:GM).
You could say what can go wrong has turned bad for the auto industry in 2022. Semiconductor chip shortages and COVID-19 lockdowns in some international markets, like China, have disrupted supply chains. Historically high inflation on the materials used to manufacture vehicles is eating away at automotive margins. Yet despite these headwinds, GM is determined to enrich long-term investors.
After many years of waiting for the next big organic growth opportunity for auto stocks, it has finally arrived. The electrification of automobiles is expected to lead consumers and businesses to change or upgrade their vehicles for decades to come.
For its part, General Motors spared no expense. The company plans to spend a total of $35 billion through 2025 on electric vehicles (EVs), autonomous vehicles and batteries. It expects two fully dedicated battery factories to be operational by the end of next year, with the goal of producing at least 1 million electric vehicles a year in North America by 2025. A total of 30 new electric vehicles are expected to be launched globally by the end of 2025.
Initial numbers suggest there’s a lot of interest in GM’s EV products. When GM released its first-quarter operating results on April 26, CEO Mary Barra noted in her letter to shareholders that approximately 140,000 retail reservations for the Chevy Silverado EV had already been placed. The Silverado EV was only introduced by Barra in January 2022.
General Motors also has a real chance of becoming a key player in China’s electric vehicle market. China is the largest automotive market in the world. Besides the fact that GM has an established presence in China – it delivered 2.9 million vehicles in 2020 and 2021 – it and its joint venture partners already have the country’s best-selling electric vehicle, the Wuling Hong Guang Mini EV. .
With a vast opportunity for growth on its doorstep, General Motors is an incredible bargain at just five times Wall Street’s projected earnings for 2022 and 2023.
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Sean Williams holds positions at Bank of America. The Motley Fool holds and recommends Activision Blizzard, Berkshire Hathaway (B shares) and Microsoft. The Motley Fool recommends the following options: $200 long calls in January 2023 on Berkshire Hathaway (B shares), $200 short puts in January 2023 on Berkshire Hathaway (B shares) and short calls of $265 in January 2023 on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.
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