Everyone loves to opine on what Warren Buffett has already bought for his Berkshire Hathaway Inc. (NYSE:BRK.A, NYSE:BRK.B) portfolio. What we don’t hear a lot about is stocks Warren Buffett should buy for Berkshire Hathaway. If you look at Warren Buffett’s history, he tends to purchase very specific types of companies.
The best way to describe the companies he focuses on is that they offer products that consumers use on a regular basis. If consumers themselves don’t use the product, then businesses will use the products or services provided by the Berkshire-owned company.
With that said, I have seven stock suggestions for Warren Buffett. They fit his general criteria, but they also have one other element that he likes: the stocks are undervalued.
Stocks Warren Buffett Should Buy: Enova (ENVA)
Banks and financial services companies are very high on the Warren Buffett ownership list. I think he needs to look at subprime and near-prime consumer lending. To that end, he should take a look at the leading consumer lender in the country, Enova International Inc (NYSE:ENVA).
The company has very robust analytics and is an expert at underwriting loans. After a period of regulatory uncertainty, Enova has emerged stronger than ever before, with significant upside.
If I were Warren Buffett, I would actually buy the company out completely.
Stocks Warren Buffett Should Buy: Amazon (AMZN)
I know it will cause some controversy to suggest that Warren Buffett purchase Amazon.com, Inc. (NASDAQ:AMZN).
It is certainly a fair argument to suggest that Amazon stock may be overvalued. The truth is it’s very difficult to peg an honest valuation on this company, but if anyone can, Warren Buffett could. Let’s take note that he has long had a position in Walmart Inc (NYSE:WMT). The consumer sales powerhouse is struggling to maintain its position against Amazon.
Why fight it? Dump the Walmart position and buy Amazon.
Stocks Warren Buffett Should Buy: Starbucks (SBUX)
I don’t see any reason why Warren Buffett shouldn’t have Starbucks Corporation (NASDAQ:SBUX) in his portfolio.
Starbucks is a global powerhouse, and while it’s in the midst of transitioning to a new growth model, it also means it’s a good time to jump in. There is an argument to be made that Starbucks is not undervalued right now. However, should the market experience a serious correction in the near term, that could take the price of Starbucks down to a level where Warren Buffett can and should accumulate a position.
Stocks Warren Buffett Should Buy: Disney (DIS)
Another company that I find strangely absent from the Warren Buffett portfolio is Walt Disney Co (NYSE: DIS). Disney is, and has been for decades, the top purveyor of family entertainment. Its parks and resorts continue to do very well, it sells tons of merchandise and it has a portfolio of four incredible movie studios that have enough content to last for the next generation. While its television programming side is struggling a little bit, I believe all that will get sorted out when it launches its streaming service in the next 18 months.
Right now Disney is well off its all-time high, and this is a great time for both to buy in.
Stocks Warren Buffett Should Buy: Alphabet (GOOGL)
Google is the single biggest influencer and ad revenue generator on the internet. It’s an advertising business, and easily the most dominant one. Not only that, it has tons and tons of cash on hand, produces tons of free cash flow and has a dominant position in the marketplace. Its wide moat means no competitor is going to be able to touch it.
It is also, in my opinion, undervalued at its current price.
Stocks Warren Buffett Should Buy: Exxon (XOM)
Where the heck is energy exposure for Warren Buffett?
I can’t believe he doesn’t have one of the major exploration and production companies in his portfolio. I think the way to go at present, because it’s trading at a value price, is the legendary Exxon Mobil Corporation (NYSE:XOM). The company has stagnated a bit as oil prices have improved.
While any of the big names I think would be a good purchase, Exxon Mobil right now appears to be the best value of the entire sector.
Stocks Warren Buffett Should Buy: Public Storage (PSA)
My final choice for Warren Buffett would be Public Storage (NYSE:PSA).
Self-storage has always been a good business, but it really took off during and after the mortgage crisis. A lot of people got kicked out of their homes and a lot of people had to put their belongings into storage.
With housing prices having gone back up in the interim, a lot of people can’t afford to get back into homes. Public Storage has almost 2,400 facilities across 38 states, and now has expanded into Western Europe with 200 facilities. This is the kind of business where consumers either sign for a fairly long time or move out and are often replaced by new customers.
Lawrence Meyers is the CEO of PDL Capital, a specialty lender focusing on consumer finance and is the Manager of The Liberty Portfolio at www.thelibertyportfolio.com. He owns shares of ENVA and DIS. He has 23 years’ experience in the stock market, and has written more than 2,000 articles on investing. Lawrence Meyers can be reached at [email protected].