7 ‘Warren Buffett Stocks’ to buy

These seven stocks fit in Warren Buffett’s playbook.

The following “Warren Buffet stocks” have all of the characteristics of great long-term investments except that the world-famous investor does not already own them. Throughout his career, Buffett has created a successful, streamlined investment thesis based on a simple saying: buy low, hold long, sell high. Buffett focuses on business models that he can easily understand and focuses 85% of his holdings in three sectors: consumer staples, information technology, and financial services. In these sectors, Buffett believes that wide economic rifts and strong brand names isolate companies from competition and generate consistent cash flows. Famous, Berkshire Hathaway Inc. (Ticker: BRK.A, BRK.B) never paid a dividend, but reinvested profits. With the stocks Buffett owns, however, he sees dividends as a way that companies reward long-term shareholders. With that in mind, here are seven stocks that look like perfect additions to Buffett’s stock portfolio.

Estee Lauder Cos. Inc. (Tbsp)

Founded in 1946, Estee Lauder manufactures and sells prestigious beauty products worldwide, including well-known brands such as Aveda, Clinique, Michael Kors and Tom Ford Beauty. Buffett believes that high performing global brands generate consistent revenue, and this large collection of renowned names enables Estee Lauder to maintain pricing power over its customers and helps offset the increased cost of raw materials or operating costs. In addition, Estee Lauder has a strong track record of successful acquisitions. Earlier this year the company increased its stake in the rapidly growing DECIEM Inc. from 29% to 76% and agreed to purchase the remaining shares within three years. With nearly $ 5 billion in cash on hand, Estee Lauder is expected to continue targeting value-adding acquisitions that will increase market share over the long term. In fiscal 2021, net income rose 320% after falling 62% the previous year. Estee Lauder stock is up about 47% over the past year.

CSX Corp. (CSX)

Berkshire Hathaway acquired the 77% stake in the Burlington Northern Santa Fe Corp. railroad company, which it did not yet own, for $ 26.3 billion in 2010. Buffett viewed the deal as an “all-in bet on the economic future of the United States”. CSX has more than 20,000 miles east of the Mississippi River and forms a stranglehold on the rail networks in the eastern United States. Inefficient ports and trucker shortages were headwinds, but the recently released third quarter results were a home run. The company posted net income of $ 968 million and revenue of $ 3.29 billion, exceeding analyst expectations while reducing its operating rate by half a percentage point. “The focus of management on the operational business has led to improved service and strong margins,” writes RBC analyst Walter Spracklin. Going forward, RBC expects the rail industry’s positive fundamentals to “drive long-term free cash flow growth”.

Campbell Soup Co. (CPB)

Campbell Soup makes packaged foods and has developed and acquired strong brand names such as Prego, V8, Swanson and Pepperidge Farm over its 152 year history. Buffett likes that sector, and Berkshire has a 26.6% stake in competitor Kraft Heinz Co. (KHC), although he now complains that he paid too much. For Campbell, the descent from the pandemic-induced soup-buying bonanza was tough. In the fourth quarter results, net sales were down 11% and management expects a slight decrease in profits in 2022. CPB has declined more than 14% so far in 2021, but that could be the bottom. Morningstar assigns Campbell a broad economic moat rating that “results from brand intangibles and a cost benefit.” Morningstar estimates the fair value of $ 48.50 for CPB stock, and the stock closed at $ 40.19 on October 28, suggesting significant upside.

JPMorgan Chase and Co. (JPM)

During the pandemic, Buffett sold many of its banking holdings, including Goldman Sachs Group Inc. (GS), JPMorgan and Wells Fargo & Co. (WFC). Today he can kick himself. JPMorgan is the gold standard for Bank stocks and offers a full range of services, from checking accounts to asset management and investment banking. Morningstar has recognized JPMorgan as having a deep economic moat due to its sustained cost advantage and leadership positions in almost all competitive areas, allowing it to benefit from unrivaled size and reach in the United States, with net income of $ 5.6 billion on total sales of 12, $ 4 billion. In addition, the sales volume of debit and credit cards within JPMorgan’s retail and community banking division increased 26% and average deposits increased 20%. Over the past year, JPM stock is up about 75%.

Square Inc. (SQ)

Buffett also has a sweet spot for financial services companies like American Express Co. (AXP) and Moody’s Corp. (MCO). Founded in 2009 by Twitter Inc. (TWTR) Co-Founder Jack Dorsey, Square is a payments company known for its white square credit card readers and the cash app peer-to-peer payment system. How many growth minded Technology company, Square does not pay dividends, but instead reinvests profits in growth initiatives. In early August, Square announced that it had closed a $ 29 billion deal to acquire Afterpay, an Australian buy-now, pay-later, or BNPL platform. Following the acquisition, Square plans to integrate Afterpay’s platform with its credit card readers and cash app so that even the smallest merchants can offer BNPL and installment payments. Square gives a total addressable market of $ 100 billion for sellers and $ 60 billion for customers, and estimates that it only tapped 2 to 3% of the market, implying high upside and long-term value creation.

Metlife Inc. (MET)

Buffett loves insurance companies because they generate cash at a low cost and because they are a relatively stable, defensive industry. Founded in 1868, Metlife provides insurance and financial services to individuals and institutions. Insurance companies have a business model – take fees, invest in appreciation, and then pay claims – that allows them to capitalize, when Interest rates rise. In the second quarter of 2021, premium and fee income was $ 11.2 billion, 7% more than the same period in 2020, and investment income increased 29% to $ 5.3 billion. Given the decline in COVID deaths and the increase in overall employment, Metlife expects to pay out fewer life insurance claims and add members to its group plan. Additionally, Metlife approved $ 3 billion in share buybacks in August, meaning the company believes the market is undervaluing the stock.

Mohawk Industries Inc. (MIC)

Mohawk Industries manufactures flooring for residential and commercial customers. With a market capitalization of over $ 13 billion, the company is the largest flooring supplier in the world and holds leading positions in carpet, tile and hardwood products. Although Mohawk posted negative sales growth for 2020 and 2019, there has been a trend reversal over the past four quarters, with sales increasing 44% in the fiscal second quarter. In terms of operational efficiency, EBITDA margins – earnings before interest, taxes, depreciation and amortization – have improved for five quarters in a row. JPMorgan expects “another runway for” [operating] Margin improvement over the next 1-2 years. ”With material supplies and labor availability facing headwinds, Mohawk has allocated $ 650 million in new capital investment to alleviate production constraints. Mohawk also has a P / E ratio of around 13, which is below the industry average, and the stock price has more than doubled over the past year.

Seven “Warren Buffett Shares” for Sale:

– Estee Lauder Cos. Inc. (Tbsp)

– CSX Corp. (CSX)

– Campbell Soup Co. (CPB)

– JPMorgan Chase and Co. (JPM)

– Square Inc. (SQ)

– Metlife Inc. (MET)

– Mohawk Industries Inc. (MIC)

More from US news

What’s the best cryptocurrency to buy right now? 7 competitors

The 9 Best Cheap Stocks to Buy Now Under $ 5

7 ETFs for rising interest rates

7 ‘Warren Buffett Stocks’ to buy originally appeared on usnews.com