Warren Buffett is considered by many to be the most successful investor in history. That's quite the distinction, and it's not hard to see why investors pay such close attention to his individual investing moves and his broader strategies and approaches to life and the market. Today, a single share of Berkshire Hathaway's class A stock goes for roughly $427,000 -- up more than 2,247,000% since Buffett took over as the company's CEO in 1965.
With that incredible performance in mind, a panel of Motley Fool contributors has identified three stocks in Berkshire portfolio that look primed to deliver wins. Read on to see why they think that StoneCo (NASDAQ: STNE), Verizon (NYSE: VZ), and Chevron (NYSE: CVX) are Buffett-backed stocks worth adding to your portfolio this month.
Don't count this fintech stock out
Keith Noonan (StoneCo): Warren Buffett's advice to be "fearful when others are greedy and greedy when others are fearful" is probably one of the world's most famous and frequently repeated pieces of investing wisdom. It's also easier said than done.
After all, there may be well-founded reasons for being fearful at a particular moment in time, and looking ahead to brighter days can be difficult when the prevailing attitudes are colored by pessimism and uncertainty. On the other hand, it's clearly worked wonders for Buffett. I think that patient investors have a worthwhile opportunity to get greedy with StoneCo stock.
StoneCo is a leading provider of payment-processing and other financial technology services in Brazil, but the company's share price has been crushed by what could be described as a perfect storm of headwinds. In addition to inflation and political concerns, regulatory changes in the country have dampened the performance and outlook for the company's credit business.
The company's share price is now down roughly 64% from the high that it hit earlier this year, and many investors appear to have given up on the stock. I think that's probably premature, and I'll be adding it to my holdings in the near future.
When it comes to growth stocks, I like to look for companies that are on track to benefit from powerful long-term trends. StoneCo certainly fits the bill. Cash is still a more popular payment method than credit cards and mobile payments in Brazil, but that's starting to change, and StoneCo is helping businesses adapt to the shift. E-commerce is also on track for huge growth in Brazil and other Latin American markets, and the fintech specialist stands out as an appealing "pick and shovel" stock for benefiting from the trend.
While the overall stock market continues to look volatile, StoneCo looks attractively valued and has big upside at current prices. Pushing through the fear surrounding the stock could prove very rewarding for patient investors.
There's good reason to think defensively
James Brumley (Verizon): The broad market certainly looks like it could be on the mend following September's swoon. But I'm still not completely convinced we're going to be able to postpone a correction much longer. The S&P 500 is still up 100% from last March's low and has yet to slide more than 10% at any point during that run-up. It's time for a healthy pullback sooner or later, and I fear it will be sooner rather than later.
During these periods of turbulence, Warren Buffett's preferred approach really starts to work. The dividend-paying cash cows Berkshire so often owns become safe havens for investors as they fall into favor and subsequently (usually) see price increases. I can't think of a more solid defensive name Buffett owns right now than telecom-giant Verizon.
Verizon may well be one of the market's most perfect cash flow machines. Consumers may postpone the purchase of a new car if it looks like an economic headwind is about to start blowing, or skip a trip to the mall. But people aren't likely to risk allowing their mobile phones to be disconnected by missing a payment for their wireless service. These ongoing payments support Verizon's dividend, which currently translates into an incredible yield of 4.7%. Not bad.
A balanced way to capitalize on the oil boom
Daniel Foelber (Chevron): Warren Buffett is known for favoring industry-leading companies that also pay high dividends. Recognizable Buffett favorites include Kraft Heinz, Coca-Cola, and Verizon -- to name a few.
Despite the high dividend yields available in the oil patch, Buffett has largely stayed away from oil and gas stocks. Granted, Berkshire Hathaway Energy is one of Buffett's "big four." It consists of over $100 billion in assets -- largely tied to fossil fuels.
Investors should keep in mind that Berkshire is a massive investor in oil and gas, just not oil and gas stocks. But one exception is Chevron.
Berkshire reduced its Chevron stake by more than 50% in the first half of 2021. Similar to the decision to sell airline stocks too soon, there's reason to believe Buffett may be trimming this Dividend Aristocrat at a bad time.
Chevron is a diversified and fundamentally strong oil and gas major that offers a balanced way to invest in a sustained oil and gas boom. Just a few years ago, it was spending a lot of money to develop long-term projects. The company is now in a cycle of lower spending, which has helped it maintain a better balance sheet than its peers while continuing to raise its dividend when other majors are cutting theirs.
The company is taking a disciplined approach to project development by shifting capital toward projects with the best returns and cutting back on less profitable assets. A good example of this strategy was the decision to buy Noble Energy in 2020 for what now looks to be an absolute bargain-bin price.
Like any oil and gas stock, Chevron faces long-term headwinds as developed countries shift toward cleaner-burning energy sources. But the reality is that the world still largely depends on fossil fuels for just about everything. Given Chevron's 5.1% dividend yield and industry-leading position, it looks like a great candidate for investors looking for exposure to high oil and gas prices without taking on too much risk.
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Daniel Foelber has the following options: long January 2024 $30 calls on Stoneco LTD. James Brumley has no position in any of the stocks mentioned. Keith Noonan owns shares of Stoneco LTD. The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares) and Stoneco LTD. The Motley Fool recommends Verizon Communications and recommends the following options: long January 2023 $200 calls on Berkshire Hathaway (B shares), short January 2023 $200 puts on Berkshire Hathaway (B shares), and short January 2023 $265 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.