2 Warren Buffett Stocks to Buy in May

Many of the stocks held in Warren Buffett-led Berkshire Hathaway's (BRK.A -0.30%) (BRK.B -0.26%) portfolio are at or near all-time highs, and to be perfectly honest, some are looking a bit too expensive. However, there are still some bargains to be found in the Oracle of Omaha's stock portfolio, and here are two examples that are worth a look in May.

Share prices current as of 5/4/17.

Solid growth and a massive hoard of cash

In a relatively short time, Apple (AAPL 0.52%) has become one of Berkshire's largest stock holdings, and it's not difficult to see why Warren Buffett likes it so much. The company has some pretty strong competitive advantages that should protect its market share for years to come, including its brand name and fiercely loyal customer base.

Image source: The Motley Fool.

For the most recent quarter, Apple beat earnings estimates and grew its revenue by 5% year-over-year. Service revenue (sources like Apple Music, AppleCare, and Apple Pay) was a particularly encouraging part of the earnings report, up 18% year-over-year.

Another reason to take a look at Apple is that the company could be well-positioned to capitalize on a potential repatriation tax holiday. Apple revealed that its cash hoard has grown to a staggering $256.8 billion, and with Republicans proposing a one-time repatriation tax holiday with a 10% rate. This could save Apple about $64 billion as compared with the current corporate tax rates, and could finally incentivize Apple to bring home its cash and put some of it to work.

Even with its dominant market position and the projection that as many as 300 million iPhones could be set to upgrade later this year, the stock still trades for just 16.4 times this year's expected earnings. This may not sound like a tremendous bargain, but consider that excluding the monster cash hoard, the company's P/E drops to just 10.9.

Buy the dip in the smartest guys on Wall Street

Goldman Sachs (GS -0.71%) is a "buy the dip" situation, with the stock down about 10% over the past two months and a disappointing earnings report. For the first quarter, the company posted a rare earnings miss, which was especially troubling to many investors because most other banks' results were quite strong. For example, Bank of America met or beat expectations on most metrics.

Trading revenue was a major weak spot for Goldman, with equities trading revenue falling 6% year-over-year and flat bond trading revenue. Rivals JPMorgan Chase and Citigroup both reported strong trading revenue. In fact, JPMorgan beat trading revenue estimates by more than $1 billion and saw 17% year-over-year growth in bond trading, and Citigroup saw its trading revenue rise by 19% and 10% in bonds and equities, respectively. So, it's easy to see why this could be an area of concern for Goldman's investors.

To be clear, the first quarter was a disappointment. However, there was some good news that investors need to keep in mind. For one thing, Goldman was number one in announced M&A activity as well as equity and common stock offerings so far in 2017. Also, the bank's revenue rose 27% year-over-year, but expenses grew by just 15%. Investing and lending revenue was the highest it's been in four years, and investment management revenue increased by 12%.

Shareholders also got a 15% dividend increase and Goldman authorized an aggressive 50 million share buyback program, which represents about 13% of the total shares outstanding.

The bottom line is that it's important not to make the mistake of assuming that one poor quarterly report is an indicator of a longer-term trend. When Warren Buffett first invested in Goldman in 2008, he referred to his investment as a "bet on brains" and called Goldman the best firm on Wall Street. Buffett's original reasons for investing still apply today, so now could be a smart time to add Goldman to your portfolio since the stock has retreated a bit from its highs.