There’s no denying that Warren Buffett is an amazing investor. Thanks to his acumen for picking great stocks at cheap prices, Buffett has transformed Berkshire Hathaway (NYSE:BRK.A, NYSE:BRK.B) from a struggling textile mill into a giant force. A $100 investment in Berkshire back in the 1980’s would be worth more than $8,000 today. That’s some serious compounding and underscores why Buffett has been one of the best investors of all time.
So, following his lead makes a ton of sense — especially in this market.
The reason is that Warren Buffett tends to focus on so-called quality stocks. These firms feature wide moats, plenty of cash flows, dividends and steady earnings. Warren Buffett stocks aren’t flashes in the pan. This focus on quality is what drives Berkshire Hathaway’s returns over the long haul. And with the markets getting a bit top heavy, this quality factor is becoming even more important.
For investors, it makes a ton of sense to follow Berkshire Hathaway’s lead and buy Warren Buffett stocks. And with BRK’s latest U.S. Securities and Exchange Commission Form 13-F report, we can now see exactly what he’s been buying. With that, here are five Warren Buffett stocks to buy for today’s market.
Warren Buffett Stocks to Buy: Apple (AAPL)
Number of Shares: 248 million shares
Looking at the headlines, you would think that Berkshire has soured on Apple (NASDAQ:AAPL). Yes, BRK did sell about 750,000 shares during the last quarter. However, AAPL remains one of the biggest holdings in Buffett’s portfolio. Today, the firm’s stake is still monstrous and worth over $55 billion. And its easy to see why Apple fits the definition of a quality Warren Buffett stock.
For one thing, Apple continues to innovate. The firm’s latest batch of smartphones and gadgets are quickly becoming must-have devices. Sales of the new iPhone remain swift. At the same time, AAPL continues to move further into offering services on those devices. This is all good because sales from the iTunes Store, App Store, as well as subscriptions to Apple TV, come with fat margins. In fact, Apple’s gross margins clocked in close to 64% last quarter.
That makes it a cash flow machine — which Buffett loves.
At the end of the last quarter, AAPL’s cash pile was still hovering around $210 billion. It’s crazy, because the tech giant continues to up its dividend as well as conduct some hefty buyback activity. For Buffett, this is manna from heaven. Add in Apple’s overall cheap valuation when compared to other tech stocks, and you can see why Buffett still holds a ton of shares.
So yeah, BRK sold some Apple. But Buffett is still holding a ton of cash in BRK’s portfolio, and so should you.
Store Capital (STOR)
Number of Shares: 18.6 million shares
Historically, real estate investment trusts haven’t been included in Berkshire Hathaway’s portfolio. I can remember that Buffett owned a few million shares of now-defunct HRPT Properties and First Industrial Realty Trust (NYSE:FR) … back in 2000. He sold them both roughly a year later. So the fact that Store Capital (NYSE:STOR) is among Warren Buffett stocks today is impressive.
STOR focuses on the holy grail of real estate — single-tenant net-lease properties. Think of your local Taco Bell or Jiffy Lube. The key is that these tenants tend to sign long-term leases and stay put for a while. Secondly, these leases require tenants to pay property taxes, insurance and most maintenance costs. What this does on STOR’s end is create fat margins and predictable cash flows.
The real win is that STOR is relatively small compared to other net-lease giants like Realty Income (NYSE:O). With only 2,400 properties under its umbrella, it’s much easier for STOR to grow. And grow it has. Over the last few years, STOR has tacked on roughly 500 properties. That’s helped it move the needle in terms of cash flows and dividends. In fact, since its IPO in 2014, the REIT has managed to grow its dividend by 40%.
With such strong cash flows and dividends, it’s easy to see why Buffett has fallen in love with STOR.
Synchrony Financial (SYF)
Number of Shares: 20.8 million
You may not have heard of Synchrony Financial (NYSE:SYF), but there’s a good chance that you may have one of its products in your wallet. SYF is one of the largest issuers of store-branded credit cards in the country. Firms like Amazon (NASDAQ:AMZN), Lowe’s (NYSE:LOW) and Dick’s Sporting Goods (NYSE:DKS) partner with SYF to offer their store cards and rewards programs. The kicker for Synchrony is that store cards often come with higher interest rates and lower credit limits than a regular universal credit card.
Meanwhile, SYF has an easy source of available cash to lend to consumers. The credit card issuer is behind one of the most popular online banks around. Thanks to its high margins on credit products, SYF’s online bank tends to feature high rates for its savings products. This has continued to draw in customers. Right now, the firm has about $64 billion in FDIC deposits on its balance sheet.
Now, I know what you’re thinking is that credit lending can be a risky endeavor. But Synchrony seems up to the task. First, the firm uses a ton of data and artificial intelligence in its lending practices. This has allowed it to see declining net charge-offs and loan losses. Secondly, it’s tier 1 capital ratio is pretty strong considering how “small” of a bank it is.
The end result is a lender who’s very profitable and shares those profits via rising dividends and buybacks. With new moves into digital payments, SYF should be able to keep the growth going into the future.
Number of Shares: 400 million
There’s a good chance that Buffett has Cherry Coke running through his veins. With 400 million shares, Coca-Cola (NYSE:KO) remains one of the largest and oldest Warren Buffett stocks in the Berkshire portfolio. The key here is consistency.
KO is as recession resistant as they come. Demand for juices, water and soft drinks remains pretty steady no matter what the economic environment. That fact has made Coca-Cola a cash flow and profit stalwart throughout its history. And investors in KO have been rewarded through thick and thin as well. This year represented the 57th consecutive year of dividend increases.
What’s really great is that the firm keeps on changing with the times successfully. As health concerns and consumer tastes have changed, so has Coke. Today, sparkling water, juices, teas and other healthy drinks are now a priority at the firm. And these shifts are helping keep the mojo and cash flowing at the beverage giant. In fact, growth here has been so successful that KO recently upped its guidance for the full year.
In the end, Coca-Cola is a Warren Buffett stocks classic. It offers all the safety of a great leader and plenty of growth behind it. No wonder Berkshire owns so many shares.
Bank of America (BAC)
Number of Shares: 927 million
Wells Fargo (NYSE:WFC) has long been the Warren Buffett stock among the big banks. But after years of scandal, Berkshire is searching for a new top financial firm. And it found it in Bank of America (NYSE:BAC). Buffett already owns more than 927 million shares, but he recently asked the Federal Reserve to allow BRK to increase its stake past the 10% ownership level.
For Buffett, the BAC love is understandable.
Since the financial crisis, Bank of America has transformed itself into a better-run bank. It has expanded its retail, high-net worth and advising clients via the Thundering Herd. This allowed BAC to see 18 consecutive quarters of margin expansion. And while that streak ended lasted quarter, Bank of America still delivered top-notch results that most banks would be envious of. Meanwhile, BAC continues to invest in technology. This includes a Venmo-styled peer-to-peer product that allows corporate clients to move billions via an app.
All of this work has made BAC a wonderful dividend stock as well. After getting clearance from the Fed, the bank has boosted its payout and conducted plenty of buybacks. And with a forward price-to-earnings multiple of just 11, shares are dirt cheap.
High cash flows, cheap valuations and market leadership? No wonder why Buffett is attracted to it.
At the time of writing, Aaron Levitt held a long position in AMZN.