Warren Buffett celebrated his 87th birthday on August 30, and with a net worth of close to $80 billion, he probably didn't exactly need any birthday presents. However, Buffett could have some presents for you -- namely, investing ideas.
Buffett's Berkshire Hathaway (BRK.A 0.99%) (BRK.B 0.91%) owns positions in around 40 stocks. Many of them are great picks for investors who aren't billionaires yet. Here's why IBM (IBM 0.18%), MasterCard (MA 0.30%), and Johnson & Johnson (JNJ 0.82%) look like good Warren Buffett stocks to buy in September.
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IBM -- for its value and its dividend
Yes, Buffett did sell around one-third of Berkshire's stake in IBM earlier this year. However, Berkshire still owns a position in the technology giant valued at roughly $7.7 billion. That's a pretty significant chunk of change, even for Buffett.
I like IBM right now as a value play. The stock is trading at just over 10 times expected earnings and a little over 11 times free cash flow. That's dirt cheap, in my view, even though revenue and earnings continue to fall. The consensus on Wall Street is that IBM can turn things around and return to growth, albeit slow growth. I think Wall Street is right.
In particular, IBM's expertise in artificial intelligence (AI) could pay off over the long run. The company led the tech industry last year in the number of AI patents held. You don't have to be a Nostradamus to see that AI will become much bigger than it is now -- and that should be good news for IBM over the long run.
I also like IBM as an income play. The dividend currently yields 4.16%. Who wouldn't like getting that kind of steady return each year? And with a payout ratio of 47%, IBM appears to be in good position to keep the dividends flowing.
MasterCard -- for its growth
If you're seeking growth, Buffett has a good option for you on that front, too. MasterCard's earnings in the first half of 2017 were up 16% over the prior-year period. Analysts project the payment-solutions company can keep growing earnings by more than 15% annually over the next five years. I suspect MasterCard will be able to achieve this level of growth.
There are a couple of trends that should drive MasterCard's growth. First, people aren't using cash nearly as much as they used to. Instead, they're using credit cards. Second, online commerce is growing rapidly. The U.S. Census Bureau estimated that retail e-commerce sales in the second quarter of this year increased 4.8% -- not year over year, but compared with the first quarter of 2017. And guess how most individuals pay for their online commerce purchases? If you're thinking of credit cards, pat yourself on the back.
MasterCard isn't likely to lose many of its current customers. Retailers and consumers know the company and its reputation. Accumulation of reward points makes it unlikely that consumers will want to switch credit cards frequently.
As for picking up new customers, MasterCard has been actively going after -- and winning -- deals for co-branding of credit cards with retailers. The company's full suite of digital payment solutions sets it apart from its rivals.
Johnson & Johnson -- for just being J&J
Berkshire has owned Johnson & Johnson stock for quite a while. However, Buffett sold off most of Berkshire's stake in J&J in 2012. He probably wishes that he hadn't: J&J stock is up more than 80% since January 2013.
I like Johnson & Johnson as a Buffett stock to buy in September -- just because it's J&J. It's not the best value stock in the world, although shares trade at a reasonable 17 times expected earnings. It's not the greatest dividend stock in the world, although its yield of more than 2.5% isn't too shabby. It's not the most impressive growth stock in the world, either, with annual earnings growth of a little over 6% projected for the next few years. But it's still Johnson & Johnson.
J&J, in my view, is something of a proxy for the healthcare industry in general. The company's consumer products, such as Band-Aids and Tylenol, are household names around the world. J&J is a leader in medical devices. And it's one of the largest drugmakers on the planet.
Market research firm EvaluatePharma ranked Johnson & Johnson No. 4 in terms of research and development spending among all big pharma companies. I expect J&J's R&D investments will pay off over the long run. Buffett might not own as much of J&J stock as he used to, but even the oracle of Omaha can get things wrong every now and then.
