Warren Buffett's track record as a CEO and investor is unparalleled, having helped millions of Berkshire Hathaway (NYSE: BRK-A)(NYSE: BRK-B) investors grow life-changing wealth. Furthermore, his pithy wisdom and open commentary about what he looks for in a good investment have helped countless others.
We asked three Motley Fool contributors to take it a step further and dig into Berkshire's current portfolio of stocks, looking for "buy-now" candidates. They came back with solid cases for General Motors Company (GM 0.66%), Teva Pharmaceutical Industries Ltd (ADR) (TEVA 0.03%), and American Express Company (AXP 4.32%).
Image source: Getty Images.
Keep reading for a closer look at each of these companies, what makes them worth owning, and why these contributors think they're priced to buy right now.
Well positioned for the future
Daniel Miller (General Motors): One Warren Buffett stock that is worth buying now, despite Wall Street ignoring the company, is General Motors. During the second quarter, Berkshire upped its stake in the largest Detroit automaker by 2% for a total of 51 million shares valued at roughly $1.9 billion, suggesting Buffett still believes in GM's long-term prospects. Sure, there's no shortage of concerns with rising aluminum and steel prices, and a plateauing North American new-vehicle market, but GM has made smart moves to position itself in the new automotive era.
GM has collected a number of its car-sharing projects under a unified Maven brand, and invested in ride-sharing company Lyft for roughly $500 million. It purchased Cruise Automation -- giving it a significant presence in Silicon Valley and a huge credibility boost -- as well as exited longtime cash black hole Europe when it sold its Opel/Vauxhall operations. Those moves have positioned GM to become a leader in smart mobility transportation and driverless vehicles, which could pay off for long-term investors, and has focused the company on more lucrative global auto markets.
While GM is well positioned for the auto industry's evolution, that doesn't mean things are completely dire in the near term. For instance, GM is continuing to cruise in China with sales growing 4.4% during the first half of 2018 to a staggering 1.84 million units. For context, crosstown rival Ford, which was slower to get into the Chinese market, posted a 25% decline to 400,443 units during the same time period. GM is also rolling out all-new versions of its bread-and-butter Chevrolet Silverado and GMC Sierra full-size trucks during the back half of 2018, which should support pricing and profitability over the next few years. Don't underestimate how much these trucks mean to automakers' profitability.
Yes, General Motors faces challenges, but the company has put itself in the right spot to take advantage of driverless car and smart mobility opportunities, while also focusing on more profitable segments such as its full-size trucks -- and that makes it one of Buffett's stocks worth buying.
A rebound play
George Budwell (Teva Pharmaceutical Industries Ltd.): In the second quarter, Buffett significantly upped Berkshire's stake in distressed generic-drug king Teva Pharmaceutical Industries, and seemingly for a good reason. In the past 12 months, for instance, Teva's shares have clawed back a healthy 48% of their value after the company's bankruptcy scare last year.
The long and short of it is that Teva seemed to be in serious trouble last year, thanks to the entrance of generic competition for the multiple sclerosis medicine Copaxone, as well as the drugmaker's questionable acquisition of Allergan's generic-drug unit that saddled it with over $40 billion in debt at one point. Teva's fortunes, however, appear to be changing markedly for the better under the company's new management team, which came to power last November.
Under CEO Kare Schultz, Teva has dramatically slashed costs, whereby it decreased its net debt to a far more reasonable $28.4 billion, per the latest update. The drugmaker also recently won Food and Drug Administration approval for its generic version of Mylan's EpiPen, which should help to shore up its top line moving forward. Teva is also inching closer to finally launching its highly anticipated migraine pill Ajovy. Once this key product is on the market, Teva should be able to start moving past the Copaxone patent expiration in earnest and into a new period of sustainable growth.
Teva obviously still has a lot of work to do based on its anemic second-quarter earnings report, but the tide does appear to be turning. Therefore, investors may want to take a page out of Buffett's playbook and grab some shares soon.
As Buffett as they come
Jason Hall (American Express): Since its founding in the mid-1800s, American Express has changed dramatically from an express mail carrier connecting America's major population and economic centers, to a financial powerhouse at the heart of millions of daily financial transactions. Long-term investors in the company -- such as Buffett's Berkshire Hathaway -- have done incredibly well. And I think its future prospects could be just as good.
To start, American Express is still a growth company. Last quarter, net revenue increased 9% while earnings per share jumped 25%, a sharp improvement sequentially as well and one of its best-ever quarterly results.
AXP EPS Diluted (Quarterly) data by YCharts.
American Express expects to keep delivering strong profits ahead, too, with management setting full-year guidance for around $7.10 per share. From a valuation perspective, that makes it a solid deal, trading for just under 15 times 2018 earnings estimates.
But it's the company's long-term prospects that have me excited. AmEx is a special business, with a powerful brand that carries cachet around the world, which should help it continue to profit from the expansion of the global middle class in the decades ahead. When you combine a solid management team with a great track record of managing economic cycles and effective capital allocation, AmEx remains a top Buffett stock in my own portfolio, and I expect it will for many years to come.
