Warren Buffett is one of the most respected investors of our generation. I can get a glimpse into his thinking by looking at the stocks he owns via his investment company, Berkshire Hathaway. From the regulatory filings, I can see the type of companies he likes, as well as noting the sectors he’s staying clear of. Based on that, here are some of the stocks I like that I think Buffett would also be interested in buying right now.
Finance favourites from Warren Buffett
In the Q1 2022 filings, four of Berkshire Hathaway’s top 10 holdings were in financial services. This included the likes of Bank of America and American Express. It’s clear that Buffett is keen on this sector, and I agree with him.
Traditional banks have been a strong sector this year, largely thanks to rising interest rates. Both in the US and the UK, interest rates have jumped significantly. In fact, there seems to be scope for even more hikes before the year is out.
This aids banks, as the main way of making money is the net interest margin. This measures the difference between the rate paid out on deposits versus the rate charged on loans. The higher the base rate, the higher the net interest margin.
From a UK angle, I think that Buffett would like NatWest Group. This is a stock that I’m keen to buy at the moment. I think the business is strong and has good exposure to different types of banking including private, corporate, retail, and institutional. A risk is that the cost-of-living crisis could dampen consumer spending later this year.
Classic value plays
Warren Buffett also has a clear bias towards value stocks. Large holdings include Coca-Cola and Kraft Heinz. These type of companies might not offer blistering growth figures but they are very reliable.
One key factor that impacts this is the type of products sold. The household brands from both companies are staples. Kraft Heinz has eight $1bn+ names that I don’t think will ever go out of fashion. The benefit here is that earnings are stable and the share price should have steady growth with low volatility.
Another benefit to me of following Buffett’s thinking here is that value stocks often outperform growth stocks during a downturn. So with the lingering doubt of a potential recession in my mind, I want to look for ideas to try and protect myself.
I like Associated British Foods and Unilever as two UK-listed stocks that fit the bill. I think that Buffett would also be keen on these two stocks based on the reasoning mentioned above. As a risk, if we flip to having a strong stock market recovery, I’m likely going to underperform the returns offered from more aggressive growth stocks.