When it comes to searching for the best UK stocks to buy in March 2022, I’d turn to the wisdom of billionaire investor Warren Buffett.
The world’s most successful and enduring long-term general investor recently released another instalment of investment insights. And he did so via his 2021 letter to the shareholders of Berkshire Hathaway. The American company is his investment vehicle. It’s a conglomerate of businesses owned outright. And it also has a portfolio of stocks listed on public stock markets.
Generously, Buffett makes his shareholder letters available for all to read. And you can check out the archive by following this link if you want to.
Buffett’s a business-picker
In the 2021 letter, Buffett took issue with being labelled as a stock picker. He isn’t, he insists. Instead, he sees himself as a business picker. And that’s a crucial difference that goes a long way towards explaining the phenomenal track record of success he’s generated over decades.
The legendary stock trader Jesse Livermore once underlined the difference between businesses and their stocks as well. But unlike Buffett, Livermore was interested in timing his speculative positions in stocks. Buffett, on the other hand, is interested in owning great businesses or part owning them via stocks.
Both Livermore and Buffett realised that share price movements can become divorced from the fundamentals of their underlying businesses from time to time. And Buffett reconnects the two by focusing on valuation. When stocks move down in price, they sometimes go so far that the valuation understates the true value of a business. And that’s when Buffett tends to strike by buying a stock.
By doing so, there’s then a potential double impetus to drive stocks higher when he’s holding them. The first is a tendency for valuations to correct over time to better reflect the true value of businesses. And the second is the ongoing growth and operational progress of the underlying business.
A good time to hunt for quality enterprises
And right now is a good time to look for undervalued businesses. There’s a lot of economic uncertainty in the air and we’ve been seeing weakness for the shares of many decent businesses.
For example, my watch list contains some big-cap names that have seen their share prices suppressed in the current environment. I’m focusing on fast-moving consumer goods companies Unilever and Diageo. And in the pharmaceutical and healthcare space, I like the look of GlaxoSmithKline and Smith & Nephew. I’m also targeting global information services company Experian, asset manager Schroders and accounting software company Sage.
Of course, a positive investment outcome isn’t guaranteed just because I like these businesses now. But I see each as a quality operation and believe they’re worthy of deeper research now with a view to owning some of their shares in my long-term diversified portfolio.