While targeting Warren Buffett stocks – that is, the securities under the holdings of conglomerate Berkshire Hathaway (NYSE:BRK-B) – might not seem particularly exciting, the Oracle of Omaha may be offering the best guidance given the circumstances. Unlike other random bits of “information” you might find on the Internet, the legendary investor knows what he’s talking about.
Primarily, Warren Buffett stocks stand the test of time. It’s no secret that the Oracle is up there in age. That he’s been so prominent through multiple changes in the market (and society) underscores the virtue of his approach. Moving away from fads and flavors of the week, Buffett instead focuses on core fundamentals. Being in this business for decades, it’s easier to trust his track record.
Plus, by going through the individual ideas listed in Berkshire’s holdings, one gets a sense that Buffett hasn’t lost his touch. Put another way, you don’t have to worry about whether the core strategy accounts for outside factors like monetary policy. Nothing surprises the man.
On that note, below are the top Warren Buffett stocks that can beat the market.
Based in Reston, Virginia, Verisign (NASDAQ:VRSN) operates a diverse array of network infrastructure, including two of the Internet’s thirteen root nameservers. Per its public profile, Verisign represents the authoritative registry for the .com, .net, and .name generic top-level domains and the .cc country-code top-level domains. Also, it covers the back-end systems for the .jobs and .edu-sponsored top-level domains.
Fundamentally, Verisign ranks among the most important Warren Buffett stocks because of its criticality to digital infrastructure. Basically, the company does its job by not being recognized at all. It’s similar to how baseball fans shouldn’t know the name of the umpire calling balls and strikes. If they do, that’s a major problem.
Financially, I must admit that Verisign doesn’t offer the most exemplary example of attractiveness. Nevertheless, it’s consistently profitable, in part due to its blistering net margin of nearly 49%. Finally, analysts rate VRSN a moderate buy with a $239.50 target, implying 14% upside potential.
Johnson & Johnson (JNJ)
One of the giants of the broader healthcare umbrella, Johnson & Johnson (NYSE:JNJ) now focuses on its pharmaceutical and medical technologies business units. Under the present framework, that might be an ideal situation. Basically, when people find themselves in need of advanced pharmaceuticals or medical innovations, they’re going to pay up. Cynically, then, J&J may be somewhat insulated from market or economic downturns.
In fairness, JNJ lost more than 12% of equity value, which clashes with the performance of the benchmark equities index. Still, because of the red ink, shares got a bit more attractive from a valuation standpoint. It’s not exactly a steal. However, trading at a 14.23x forward earnings multiple, it comes in slightly better than the sector median of 15.13x.
Also, the other component that makes J&J worth consideration for top Warren Buffett stocks is the passive income. Offering a forward yield of 3.05%, the company commands 62 years of dividend increases. Lastly, analysts rate shares a moderate buy with a $178.10 target, implying 14% growth.
Floor & Decor (FND)
Perhaps the trickiest idea among Warren Buffett stocks to consider, Floor & Decor (NYSE:FND) is a multi-channel specialty retailer of hard surface flooring and related accessories. Up until October 2021, FND skyrocketed from the depths of the post-Covid-19 lows thanks to surging demand for housing. Because of a very loose monetary policy that drove down interest rates, housing sales blossomed. In turn, so did Floor & Décor.
Of course, with the Federal Reserve responding with higher interest rates, that narrative looks at the very least questionable. Still, for those who believe in America – as Buffett does – and specifically the housing market, FND may offer indirect exposure. For example, a residential real estate brokerage really only has one business. However, FND can spike due to homebuying and apartment building and renovations.
Financially, the company benefits from robust long-term sales growth. Admittedly, revenue growth has diminished but it’s still on a positive trend. Significantly, analysts rate FND a moderate buy with a $103.88 target, implying nearly 19% upside.
A hydrocarbon energy giant that needs no introduction, Chevron (NYSE:CVX) symbolizes one of the most important Warren Buffett stocks. True, such a statement clashes with the broader political and ideological push for clean and renewable energy integration. But guess what? Going green isn’t going to solve our energy problems and therefore, hydrocarbons will probably be relevant indefinitely.
I don’t want to say forever but I don’t think it’s a bad answer. Look, most of us recognize that, pound-for-pound, the U.S. is the best country in the world. I’m not trying to provoke a flame war, I’m just spitting facts as the kids like to say. Well, being the best inherently means a nation enjoys robust immigration. Thus, the population influx – combined with internal natural growth – likely means that hydrocarbons are necessities.
Also, while you’re watching CVX march onward, you can collect the forward dividend yield of 3.75%. Just as well, the payout ratio is reasonable at 41.18%. To close, analysts rate CVX a moderate buy with a $191.54 target, implying nearly 19% upside.
Another tricky idea sitting among the top Warren Buffett stocks, Visa (NYSE:V) is a financial services powerhouse. Providing credit card services and electronic fund transfers, Visa represents a vital component of everyday commerce. As The Washington Post recently noted, paper checks are dead and cash is dying. So, the article ponders, who’s using them?
Don’t look at me, please. But yes, the Post does bring up a valid point that undergirds credit card providers like Visa. Even if you’re not using plastic to make ends meet, digital transactions have become the norm. It’s almost sacrilegious to come across a business that doesn’t accept cards – oh the horror!
However, what I don’t particularly like is that many households depend on plastic to make it through the month. True, credit card debt hitting just over $1 trillion reflects (in a way) confidence in the system. But what happens if that confidence erodes? For the daring – including the Oracle of Omaha – analysts rate V a strong buy with a $282.57 target, implying 20% growth.
An enticing but now fairly risky idea for Warren Buffett stocks, Coca-Cola (NYSE:KO) still has a chance to make patient investors smile. Granted, KO slipped almost 15% since the beginning of the year, which obviously isn’t ideal. As a globally popular consumer staple, KO really shouldn’t be that volatile. Still, with the red ink, it’s looking more attractive.
On the financial print, KO stock now trades at a forward earnings multiple of 18.65x. That’s not a resoundingly great deal, considering that the sector median comes in at 19.16X. However, at the end of last year, it carried a forward multiple of 25.45x. So, relatively speaking, it’s more attractive.
Fundamentally, Coca-Cola should benefit from the trade-down effect. Basically, consumers facing pressures typically don’t cut spending cold turkey. Instead, they trade down to cheaper alternatives until an acceptable equilibrium is found. Thus, Coca-Cola products could be traded down from pricey coffee shops. Analysts peg KO as a consensus strong buy with a $68.67 target, implying almost 28% growth.
With the inclusion of Amazon (NASDAQ:AMZN) among the top Warren Buffett stocks, the Oracle confirms that he’s not just picking a bunch of boring ideas from yesteryear. Rather, he’s engaged with the contemporary ebb and flow of the equities sector. As well, with AMZN presenting risks, it demonstrates that the legendary investor is willing to gamble every now and then.
Yes, AMZN gained nearly 54% of equity value since the start of this year. However, things have been a bit shaky in recent sessions. For example, in the trailing one-month period, AMZN lost about 7% of its value. Still, Buffett is likely focusing on long-term consumer behaviors. According to the U.S. Census Bureau, e-commerce sales as a percentage of total retail transactions hit 15.4% in the second quarter.
That’s sizable considering the headwinds against the consumer economy. In full disclosure, stakeholders pay a premium for the luxury of owning AMZN. Right now, it trades at nearly 42x forward earnings, well above the underlying sector’s 13.42x. But again, we’re talking about one of the most relevant enterprises in the history of business. To reassure investors, analysts rate AMZN a strong buy with a $176.33 target, implying nearly 34% upside.
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