13 Best Warren Buffett Stock Picks for Beginners
In this article, we discuss the 13 best Warren Buffett stock picks for beginners. To skip reading Warren Buffett's investment strategy and Q2 bets of Berkshire Hathaway, go directly to the 5 Best Warren Buffett Stock Picks for Beginners.
The Oracle of Omaha, Warren Buffett, might not be the wealthiest man in the world, but he’s arguably the most successful investor of our time. However, Warren Buffett does not consider money the greatest investment tool. He once said:
“The best investment by far is anything that develops yourself, and it's not taxed at all.”
What Beginners Can Learn From Buffett
Stock picks for beginners can be challenging. However, taking lessons from Warren Buffett’s life and investment strategy is valuable for beginners and experts alike. One of the best lessons beginners can learn from Buffett is how to spend money. Despite being one of the richest men in the world, he lives a very simple life. While many people spend money on luxuries such as cars and massive houses, Buffett has only changed three cars in the last two decades. He changed his Lincoln Town Car for a 2006 Cadillac DTS after almost a decade and then replaced his DTS with his current car, the 2014 Cadillac XTS. His frugality means that he now has enough money to buy anything he wants at a whim. Buffett says:
"I have everything in life I want; it's a very simple thing. If there's anything that money could buy that I wanted, I would do it this afternoon without hesitation."
From an investment point of view, one of the first things that beginners can learn from Buffett is to invest in businesses instead of stocks. It means that an investor should pick a business they understand. It will help the investor understand how the business is going and how it will possibly perform in the future.
Moreover, Buffett’s most well-known investment strategy is long-term value investing. He chooses stocks with strong fundamentals based on their intrinsic value and keeps them for a long time. He says that a stock is not worth buying if you can't keep it for 10 years.
Warren Buffett is also against diversification. Diversification is not necessarily a bad thing for beginner investors who do not have much backup. Diversification can be beneficial because they won’t lose everything if one of the investments goes completely downhill. However, if Buffett's advice on investing in companies you understand is to be taken into consideration, investing in just a few businesses you know well can be rewarding. In the second quarter, 51% of Berkshire Hathaway was covered by Apple Inc. (NASDAQ:AAPL) and Buffett has held the stock for almost 7 years.
Warren Buffett’s Bets in Q2 2023
In the second quarter, Berkshire Hathaway’s 13F portfolio was worth $348 billion, up from $325 billion in the first quarter. Given that Buffett doesn’t like to diversify much, his top 10 holdings covered 91% of his 13F portfolio. Berkshire sold out of McKesson Corporation (NYSE:MCK), Marsh & McLennan Companies, Inc. (NYSE:MMC), and Vitesse Energy, Inc. (NYSE:VTS). He further bought 3 new stocks, increased holdings in 2, and reduced holdings in 5.
One company that Warren Buffett is constantly increasing his holdings in is Occidental Petroleum Corporation (NYSE:OXY). Buffett started buying the company shares in 2022 when the oil prices were hitting their all-time highs due to the Russia-Ukraine war. Buffett now owns nearly 26% of the company. However, he mentioned that he is not looking to control the company because he thinks that the company is already in good hands. Despite the recent fluctuations in the oil and gas market, Buffett is still not bearish on the sector. Chevron Corporation (NYSE:CVX) and Occidental Petroleum Corporation (NYSE:OXY) are two of the top ten stocks held by Berkshire Hathaway.
According to Tipranks, Berkshire Hathaway has gained 98.31% in the last decade and the 3-year annualized return of the hedge fund is around 8.5%. Some of the best Warren Buffett’s stock picks for beginners include Amazon.com, Inc. (NASDAQ:AMZN), Visa Inc. (NYSE:V), and Mastercard Incorporated (NYSE:MA).
If you like passive income and investing in dividend stocks, you can check out the 12 Best Value Dividend Stocks to Buy According to Warren Buffett.
Our Methodology
For this article, we chose 13 stocks for beginners from Warren Buffett's 13F portfolio that had the highest number of hedge fund investors according to Insider Monkey’s database of 910 elite hedge funds.
Best Warren Buffett Stock Picks for Beginners
13. General Motors Company (NYSE:GM)
Percentage of Warren Buffett’s Stock Portfolio: 0.24%
Number of Hedge Fund Holders: 72
General Motors Company (NYSE:GM) is a top automotive manufacturing company that is known for its four outstanding vehicle brands: Chevrolet, GMC, Cadillac, and Buick. Other than automobile manufacturing, the company also provides automotive financing services, software-enabled services, and subscriptions globally through its different divisions.
On October 23, General Motors Company (NYSE:GM) released its Q3 earnings result that showed that it exceeded the estimates for Non-GAAP EPS by $0.44 at $2.28. The revenue reported by the company was up 5.3% YoY to $44.13 billion. The company had a successful quarter as EV sales saw a growth of 28%, compared to the previous quarter.
On October 23, General Motors Company (NYSE:GM) declared a dividend of $0.09 per share. The dividend is payable by December 14 to the shareholders of record on December 1. As of October 24, the company’s dividend yield is 1.26%.
Amazon.com, Inc. (NASDAQ:AMZN), Visa Inc. (NYSE:V), and Mastercard Incorporated (NYSE:MA) are some of the best Warren Buffett stock picks for beginners along with General Motors Company (NYSE:GM).
Patient Capital Management mentioned General Motors Company (NYSE:GM) in its second quarter 2023 investor letter:
“We like other names mostly ignored by the market for similar reasons. Names like Expedia (EXPE), General Motors Company (NYSE:GM), and Delta Air Lines. These companies have strong returns on capital (14%+), good competitive positions, cheap valuations (all double-digit free cash flow yields), and are returning capital to shareholders. We trust the managements to take advantage of their depressed stock prices and create long-term shareholder value.”
12. Occidental Petroleum Corporation (NYSE:OXY)
Percentage of Warren Buffett’s Stock Portfolio: 3.78%
Number of Hedge Fund Holders: 73
Occidental Petroleum Corporation (NYSE:OXY) is an American oil and gas company headquartered in Texas. It is one of Warren Buffett’s favorite companies these days as he has been increasing his firm’s holdings in the company almost every quarter since Q1 2022. Berkshire Hathaway increased its stake in the company by 6% in the second quarter. Additionally, on October 25, the firm bought an additional 3.92 million common shares of Occidental Petroleum Corporation (NYSE:OXY) at $62.83 per share. After the transaction, Berkshire owns a 25.8% stake in the company.
On October 18, Susquehanna raised its price target on Occidental Petroleum Corporation (NYSE:OXY) to $78 from $72 and maintained a Positive rating on the company stock. The firm updated its price target and rating on the hydrocarbon production and exploration sector in anticipation of its Q3 reports which are about to be released soon. Occidental Petroleum Corporation (NYSE:OXY) is expected to report its quarterly earnings on November 7.
Here is what Smead Capital Management has to say about Occidental Petroleum Corporation in its Q3 2022 investor letter:
“Our top-performing stocks in the quarter includes Occidental Petroleum (NYSE:OXY). Oil and gas have been the best game in the stock market town this year and it was a pleasant surprise to see home builders pick up even with dour news on interest rates and the economy. For the first three quarters of the year, we should change the name of our fund to the Jed Clampett Fund. Occidental Petroleum (NYSE:OXY), was one of the standouts. Up through the bear market came a “bubblin’ crude!”
11. Chevron Corporation (NYSE:CVX)
Percentage of Warren Buffett’s Stock Portfolio: 5.56%
Number of Hedge Fund Holders: 73
Chevron Corporation (NYSE:CVX) is a California-based company that explores, produces, refines, and distributes oil and gas. The company was established when Standard Oil Company merged with Pacific Oil.
On October 23, Chevron Corporation (NYSE:CVX) took a major step to solidify its position in the U.S. oil market by agreeing to acquire Hess Corporation (NYSE:HES) for $53 billion in stock. With this acquisition combined with its other recent acquisitions, the company’s shale output is projected to increase by 40% which will rival Exxon Mobil Corporation (NYSE:XOM)’s shale output.
Hedge fund sentiment was positive toward Chevron Corporation (NYSE:CVX) in Q2 as the number of hedge funds who held a stake in the stock increased to 73 in Q2 from 64 in Q1, making it the 11th best Warren Buffett stock pick for beginners. Berkshire Hathaway was the biggest stakeholder in the company with 123.120 million shares worth $19.37 billion.
Carillon Tower Advisers mentioned Chevron Corporation (NYSE:CVX) in its Q2 2023 investor letter. Here is what it said:
“Chevron Corporation (NYSE:CVX) stock also traded lower as global oil prices declined in response to fears of an economic slowdown. Energy stocks were the second-worst-performing sector in the quarter.”
10. American Express Company (NYSE:AXP)
Percentage of Warren Buffett’s Stock Portfolio: 7.58%
Number of Hedge Fund Holders: 73
American Express Company (NYSE:AXP) is a New York-based multinational financial services and travel-related services firm. The Fortune 500 company has offices in around 40 countries and offers its services in more than 110 countries.
On October 20, American Express Company (NYSE:AXP) reported Q3 earnings results which showed that the company beat EPS estimates by $0.36 at GAAP EPS of $3.30. Similarly, the revenue exceeded the estimates by $20 million and grew 13.4% YoY at $15.38 billion. In the quarter, on an FX-adjusted basis, total Card Member spending rose 7% YoY.
In Q2, 73 hedge funds held a stake in American Express Company (NYSE:AXP)’s stock with a combined stake value of $28.08 billion. In the quarter, Berkshire Hathaway was the most prominent investor of the company with 151.61 million shares worth $26.41 billion.
American Express Company (NYSE:AXP) was mentioned in ClearBridge Investments’ third quarter 2023 investor letter. Here is what it said:
“Other detractors included American Express Company (NYSE:AXP), which fell on concerns over slower consumer spending and rising charge-offs, as well as wireless tower REIT American Tower, which was pressured by the increase in rates along with the broader real estate sector.”
9. Citigroup Inc. (NYSE:C)
Percentage of Warren Buffett’s Stock Portfolio: 0.73%
Number of Hedge Fund Holders: 75
Citigroup Inc. (NYSE:C) is one of the Big Four banking institutions in the United States. It is one of Warren Buffett’s stocks for beginners because it is a safe investment and is on the Financial Stability Board’s list of Global Systemically Important Banks.
Warren Buffett has owned Citigroup Inc. (NYSE:C)’s stock since the first quarter of 2022. In the third quarter of 2023, the firm owned 55.24 million shares of Citigroup Inc. (NYSE:C) worth $2.54 billion. The company represented 0.73% of Berkshire Hathaway’s portfolio.
On October 19, Citigroup Inc. (NYSE:C) declared a quarterly dividend of $0.53. The dividend will be paid out on November 22 and has an ex-dividend date of November 3. As of October 25, the company has a dividend yield of 5.45%.
Patient Capital Management made the following comment about Citigroup Inc. (NYSE:C) in its Q2 2023 investor letter:
“We’ve recently been adding to Citigroup Inc. (NYSE:C). After perennially disappointing for decades, even the most bullish financial investors aren’t interested (a good thing in our view!). CEO Jane Fraser is making all the right moves: exiting underperforming consumer businesses, investing to improve the tech and operating infrastructure, returning capital to shareholders. These actions should result in improving returns on equity. The market reaction is a giant shrug.
We should start to see serious cost improvements in late 2024 accompanied by improving returns on equity. The stock trades at ~$46, 55% of its $85 tangible book value. The company is confident it can reach 11-12% return on tangible common equity by 2025 when it’s tangible book should be greater than $100. If it reaches its return target, as we believe, Citi should trade back to tangible book, implying a more than double over the next couple years. Meanwhile, you collect the 4.5% annual dividend, which is currently a better yield than long-term treasuries."
8. The Procter & Gamble Company (NYSE:PG)
Percentage of Warren Buffett’s Stock Portfolio: 0.01%
Number of Hedge Fund Holders: 74
The Procter & Gamble Company (NYSE:PG) is one of the biggest companies that offer consumer packaged goods and some of the biggest brands under which it sells its products are Old Spice, Safeguard, and Tide, along with several others.
On October 22, Bernstein raised the price target on The Procter & Gamble Company (NYSE:PG) to $155 from $153 and maintained a Market Perform rating.
On October 18, The Procter & Gamble Company (NYSE:PG) reported a non-GAAP EPS of $1.83, exceeding the estimates by $0.11 for Q1 and the revenue grew 6.1% YoY to $21.87 billion, topping the estimates by $290 million.
The Procter & Gamble Company (NYSE:PG) was mentioned by ClearBridge Investments in its second quarter 2023 investor letter. Here is what it said:
“Reinforcing defensive exposure and pushing our consumer staples positioning from underweight to overweight the benchmark, we added The Procter & Gamble Company (NYSE:PG), a leading consumer products company with leading franchises in a variety of stable categories, including fabric care, baby, beauty and health. It is a high-quality company with a track record of superior growth, market share gains and attractive returns on capital. It also has defensive attributes when economic conditions deteriorate. Procter & Gamble is a sustainability leader with a demonstrated commitment to addressing environmental and social objectives in how it manages the business, and it has above-average corporate governance practices. Many Procter & Gamble products have a positive impact by promoting hygiene, self-care or health.”
7. T-Mobile US, Inc. (NASDAQ:TMUS)
Percentage of Warren Buffett’s Stock Portfolio: 0.2%
Number of Hedge Fund Holders: 86
T-Mobile US, Inc. (NASDAQ:TMUS) is an American telecommunications company headquartered in Washington. It is one of the largest wireless carriers in the US. In the third quarter, the company posted mixed results as it posted GAAP EPS of $1.82, outperforming the analyst estimates of $1.72. However, T-Mobile US, Inc. (NASDAQ:TMUS)’s revenue was down 1.2% YoY to $19.25 billion and missed the estimates by $120 million.
For FY 2023, T-Mobile US, Inc. (NASDAQ:TMUS) upped its guidance. The company expects net customer additions to be between 5.7 million and 5.9 million, compared to the prior outlook of 5.6 million to 5.9 million. Core adjusted EBITDA expectations are between $29.0 billion and $29.2 billion, up from $28.9 billion to $29.2 billion. Furthermore, T-Mobile US, Inc. (NASDAQ:TMUS) is expecting its adjusted free cash flow, including payments for merger-related costs, to be between $13.4 billion and $13.6 billion, compared to the prior guidance of $13.2 billion to $13.6 billion. The company was previously expecting net cash provided by operating activities to be between $18.0 billion to $18.3 billion and increased its outlook to $18.3 billion and $18.5 billion.
In the second quarter, Berkshire Hathaway owned over 5.24 million shares of T-Mobile US, Inc. (NASDAQ:TMUS), valued at $728.114 million, covering 0.2% of the firm’s portfolio. With 86 hedge funds owning the company stock, T-Mobile US, Inc. (NASDAQ:TMUS) is one of the best Warren Buffett stock picks for beginners.
ClearBridge Investments made the following comment about T-Mobile US, Inc. (NASDAQ:TMUS) in its Q3 2023 investor letter:
“During the quarter we initiated positions in two new names: T-Mobile US, Inc. (NASDAQ:TMUS) and Gilead Sciences. T-Mobile is the best-in-class player in the wireless space, delivering the strongest growth with the lowest cost structure and the best consumer proposition. T-Mobile’s strength is rooted in its advantaged competitive position. Its superior spectrum holdings enable it to provide better wireless service at meaningfully lower cost. T-Mobile’s annual capital expenditures run about $10 billion, on the order of half the amount its peers must spend. Due to its lower cost structure, T-Mobile can undercut its competitors on price while still generating compelling profitability and returns.
This combination — superior service at lower prices — has enabled T-Mobile to outgrow its competition. In the three years since completing its merger with Sprint, T-Mobile has grown its post-paid subscriber base by about 22%. Over the same period, AT&T’s has grown by about 14%, while Verizon’s by less than 5%.
Given the high fixed-cost nature of the wireless business, these steady increases in revenue growth have led to outsize increases in profits and free cash flow. Free cash flow in 2023 is expected to come in around $13.5 billion, up from less than $8 billion last year. In 2024 free cash flow is expected to grow by over 20% to approximately $17 billion — providing a 10% yield based on today’s stock price.
We have long admired T-Mobile, but until recently the stock did not pay a dividend. The company announced its inaugural dividend in September, and we bought the stock shortly thereafter. The initial yield is about 2% and it is expected to grow about 10% per year.”
6. Johnson & Johnson (NYSE:JNJ)
Percentage of Warren Buffett’s Stock Portfolio: 0.01%
Number of Hedge Fund Holders: 88
Johnson & Johnson (NYSE:JNJ) is an American healthcare company that is based in New Jersey. Through its divisions, Pharmaceutical and MedTech, the company works in six therapeutic areas and provides products for various healthcare fields like vision, surgery, and others.
Out of the 910 elite hedge funds tracked by Insider Monkey, 88 hedge funds owned shares of Johnson & Johnson (NYSE:JNJ) stock in the second quarter, compared to 86 in the first quarter. With 3.18 million shares worth $677.72 million, Ray Dalio’s Bridgewater Associates was the biggest shareholder of the company.
On October 17, Johnson & Johnson (NYSE:JNJ) reported robust Q3 earnings. The Non-GAAP EPS of the quarter was $2.66, exceeding expectations by $0.14. The company surpassed its revenue estimation by a whopping $300 million at $21.35 billion, experiencing a 6.8% YoY growth.
Johnson & Johnson (NYSE:JNJ) is one of the notable Warren Buffett's stock picks for beginners in addition to Amazon.com, Inc. (NASDAQ:AMZN), Visa Inc. (NYSE:V), and Mastercard Incorporated (NYSE:MA).
ClearBridge Investments mentioned Johnson & Johnson (NYSE:JNJ) in its third quarter 2023 investor letter. Here is what it said:
“The health care space provided some opportunities in the quarter, as we increased our exposure to medical device company Becton, Dickinson as well as large cap pharmaceutical company Johnson & Johnson (NYSE:JNJ). Johnson & Johnson recently spun out its consumer health care business, becoming a more focused yet broadly diversified pharmaceutical and medtech company.”
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Disclosure. None. 13 Best Warren Buffett Stock Picks for Beginners is originally published on Insider Monkey.
