Recently many traders have been wondering if Warren Buffett has lost his touch. His holding company, Berkshire Hathaway (NYSE:BRK-A, NYSE:BRK-B), had seen its performance trail the stock market for an extended period as growth stocks soared while stodgier companies were left behind. For a time, it wasn’t clear what the best Warren Buffett stocks to buy were.
In 2022, however, the tables have turned. Berkshire’s more defensive portfolio has held up well while large portions of the market have been pummeled. This has investors turning back to Berkshire’s approach to look for safe haven stock picks.
As of last quarter, Berkshire Hathaway’s investment portfolio included holdings in a little over 50 different companies. As such, it’s important to use prudence when picking among Buffett’s holdings for the best options. The following are seven of the best Warren Buffett stocks to buy today.
Best Warren Buffett Stocks: Chevron (CVX)
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Energy prices are absolutely soaring in 2022 thanks to inflation and geopolitical unrest. This combination of factors has led to record levels of profitability for energy giants such as Chevron (NYSE:CVX).
Warren Buffett has invested heavily in Chevron and other energy names as this has played out. CVX stock is now up to the third-largest overall holding for Berkshire Hathaway. And it’s not hard to see why he picked Chevron. The company’s attractive valuation, exemplary capital allocation over the decades and healthy dividend yield make Chevron a great defensive holding for current market conditions.
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The credit ratings industry got a bad rap during the financial crisis. However, don’t let that past incident cloud your view of the industry today.
Given that there are only a few prominent ratings agencies, there is limited competition and tons of pricing power. Companies such as Moody’s (NYSE:MCO) have been absolutely phenomenal growth machines in recent years. And, with the financial system only continuing to grow in size over the longer term, there are always more assets for Moody’s to rate.
Moody’s is traditionally a very expensive stock, often selling well above 30 times earnings. That makes sense, as investors appreciate its consistent earnings and strong growth track record. However, with MCO stock down 26% year-to-date, shares are now on offer at a more attractive 26 times forward earnings.
Best Warren Buffett Stocks: Activision Blizzard (ATVI)
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Activision Blizzard (NASDAQ:ATVI) is a leading video game company that is selling at an attractive valuation following its sell-off last year. However, that’s not the primary reason Buffett recently bought into ATVI stock.
Buffett ran through the deal probabilities and concluded that ATVI stock offered a favorable risk-to-reward with shares trading around $80. Assuming the deal closes, Buffett will make something like a 20% return on that investment within months once Microsoft closes the deal. And, in the unlikely event that the deal breaks, Activision still seems reasonably valued around its current level. ATVI stock continues to trade far below $95 today, offering substantial upside for people wanting to follow Buffett’s special situation trade idea.
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Visa (NYSE:V) is one of the world’s two largest credit card companies. The company, in effect, serves as a sort of global tax on any sort of card-based transaction. Normally, Visa’s cut of transactions is quite small, think 0.2% or less of a purchase.
The company, however, tends to earn significantly higher fees on international cross-border transactions, such as when foreign currency is involved. As a result, Visa’s profits were meaningfully impacted by the global travel freeze since 2020.
With that reversing itself in a major way now, however, Visa should be a strong and persistent global economic reopening opportunity. Meanwhile, as Visa gets a set cut of every transaction, the current inflationary wave should improve profitability as higher prices lead to larger fees down the line for Visa. Historically, Visa stock has delivered tremendous earnings and share price growth. That trend should resume once current economic jitters settle down.
Best Warren Buffett Stocks: Globe Life (GL)
Globe Life (NYSE:GL) is a smaller insurance company primarily focused on life and health insurance operations. Buffett probably likes the company due to its disciplined approach to insurance underwriting; Globe Life has consistently prioritized profitable operations over rapid growth.
Berkshire has long held a stake in Globe Life and currently owns more than $640 million of the company’s stock or roughly 6.5% of the entire business. Given Buffett’s long-term history with the insurance industry, his vote of confidence is especially welcome in this situation. Additionally, GL stock is selling at a reasonable 11 times forward earnings.
US Bancorp (USB)
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Speaking of industries that Buffett knows well, banks are another space to consider. Over the decades, Buffett has invested heavily in banks, often during periods of crisis or great financial uncertainty. Like in insurance, when Buffett buys a bank, it tends to be something of a seal of good housekeeping.
That applies to US Bancorp (NYSE:USB) as well. The bank is known for being one of the best-run large banks in the country. Its core banking business is a cut above most peers, allowing it to earn persistently high returns on equity (ROE) and assets (ROA).
In addition, US Bancorp’s diversified line of operations gives it strong resilience in volatile conditions. The bank is strong in mortgages, payments, trust services and asset management among others. These fee-driven revenue models provide a great deal of diversification to the core lending business. Also, the bank’s dividend yield has climbed to a little over 4% in recent weeks.
Best Warren Buffett Stocks: Bank of New York Mellon (BK)
Bank of New York Mellon (NYSE:BK), commonly known as BNY Mellon, is one of the primary American custodian banks. These are banks that exist to take care of assets and institutional holdings rather than do retail banking.
More specifically, institutions, governments, and high-net-worth individuals use banks like BNY Mellon to manage and safe keep their stocks, bonds and other financial assets. This is a low-profit margin, high-volume business. As of December 2021, the bank had $2.4 trillion of assets under management.
Now, to be clear, BNY Mellon earns just a small cut of profit on those assets. However, rising interest rates should allow BNY Mellon to earn a slightly bigger margin on its holdings. BK stock also trades for less than 10 times forward earnings. In addition, the bank’s dividend yield is up to 3.3% with the recent decline in its share price.
On the date of publication, Ian Bezek held a long position in BRK.B and V stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Editor’s note: This article is regularly updated with the latest information.
Ian Bezek has written more than 1,000 articles for InvestorPlace.com and Seeking Alpha. He also worked as a Junior Analyst for Kerrisdale Capital, a $300 million New York City-based hedge fund. You can reach him on Twitter at @irbezek.