Legendary investor Warren Buffett is one of the most popular poster boys for successful stock investing.
The Berkshire Hathaway CEO has made a vast $100bn+ fortune since the 1960s. This makes him someone whose investing strategy I study closely when I’m searching the stock market for companies to buy.
Here are two UK shares I own that I think Warren Buffett would give his seal of approval to.
Playing the game
The video games industry is one in which the billionaire and I share an interest.
I bought shares in technical and creative services provider Keywords Studios in April 2021. Buffett, meanwhile, has held shares in games developer Activision Blizzard since the end of last year.
And he has continued building his stake in anticipation of a takeover by Microsoft. The legendary investor now owns a 9.5% stake in the studio.
I’m not surprised in Buffett’s interest in Activision Blizzard. The video games industry is now more valuable than the music and film industries combined. And it’s tipped to continue growing rapidly as improvements in both hardware and software continue.
Analysts at Grand View Research, for instance, think the sector will be worth $583.7bn by 2030. That’s up significantly from the $220.8bn it’s currently valued at.
It’s my view that demand for Keywords Studios’ services will soar as the broader market explodes. What’s more, I think it might become a takeover target, like Activision Blizzard, as consolidation in the industry heats up.
Another Buffett-like stock
Now Warren Buffett has never been a fan of investing in commodities. He famously said that “the commodity itself isn’t going to do anything for you”, noting that “you are betting on what someone else would pay for them in six months”.
But while Buffett isn’t a fan of the raw materials himself, he isn’t against buying profitable companies that pull them out of the ground. This is why the Omaha native bought Barrick Gold back in 2020 as gold prices were popping.
Sure, he sold his shares in Barrack less than a year later. However, his involvement shows that if a company is making profits, generating healthy cash flows, and possibly even paying dividends, he’ll happily give it a look.
I myself bought shares in Rio Tinto, another major commodities producer, back in June. I bought the FTSE 100 firm following heavy price weakness. My motivation was an expectation that prices of the copper, iron ore, and other metals it produces will soar over the long term.
Buffett reportedly sold his Barrick Gold shares when he thought gold prices had peaked. I think prices of many industrial metals are still yet to hit their highs. I believe factors like soaring electric vehicle demand and rapid urbanisation in emerging markets will push them higher. So I plan to cling to my Rio Tinto shares for a little while yet.