Warren Buffett has been a favorite celebrity among stock investors for decades. The longtime value investor has been uncanny with his ability to make smart investment picks, and that's been a big part of what's made the Omaha native one of the richest people in the world.
Even Buffett hasn't been immune from the coronavirus market downturn, as many of his holdings have lost a great deal of value. Yet as any good value investor knows, looking for great companies when their share prices have gotten beaten down can lead to finding some of your most successful stock picks ever. Here, we'll look at the many Buffett stocks that find themselves at bargain prices now -- and then pick a favorite from the cream of the crop.
Big losses for Buffett's favorites
You don't have to look too far down the list of Buffett stocks to see the opportunities to pick up shares on the cheap. Just take a look at how these top 10 holdings of Buffett-run Berkshire Hathaway (BRK.A 1.38%) (BRK.B 1.44%) have done over the past two months:
- Tech giant Apple (AAPL 1.12%) makes up 30% of the publicly traded stocks in the Berkshire portfolio, and it's down 22% since the beginning of February.
- Coca-Cola (KO -0.15%) is another longtime position for Buffett. It's down 28% over the same time span.
- Buffett's been a big buyer of banks and other financial institutions recently, and many of those stocks appear in the Buffett top 10. Bank of America (BAC -0.27%), S. Bancorp (USB 1.30%), and American Express (AXP 1.47%) have all fallen about 40%, while JPMorgan Chase (JPM 1.20%) has held up better with a 36% decline. Wells Fargo (WFC 1.35%) is off 43%, while bond rating agency Moody's (MCO 1.84%) weighs in with a 23% loss.
- Consumer giant Kraft Heinz (KHC 0.06%) has actually held up the best among top positions, losing "only" 19%.
- Last and lagging the bunch, Buffett's airline picks haven't done well, and Delta Air Lines (DAL 3.34%) is down 57% over two months.
You can make the case for any of these stocks being a solid pick. Bank stocks are down because interest rate spreads have narrowed to nearly nothing, but low earnings multiples make them attractive values as long as you believe that they'll avoid any systemic risk from the coronavirus pandemic. Coca-Cola and Kraft Heinz have solid brands and are defensively positioned in selling staples that millions of households buy and love. Apple could see some short-term pain, but it's still a leading seller of some of the most popular devices in the world. And even with airlines struggling, Delta has fallen so far that it's priced with a high likelihood of failure -- giving it potential for a big bounce if things go right.
However, none of those is my pick. Instead, I've gone with the preeminent Warren Buffett stock: Berkshire Hathaway itself.
The case for Berkshire Hathaway
The reason I like Berkshire now is the reason why so many investors have hated it recently. The insurance giant has a cash hoard that's unparalleled, and the coronavirus crash has given Buffett the chance to deploy that money in any of a host of smart ways. Crisis situations like this are what make Buffett stand apart from the crowd. It's been a long wait, and the amount of cash on Berkshire's balance sheet weighed on performance during the bull market. Now, though, Berkshire shareholders are likely to get their comeuppance.
Yet because Berkshire's been out of favor, it trades at bargain prices. After having sported a stock price at around 1.4 to 1.5 times book value for much of the past several years, the insurance-focused conglomerate has fallen to trade below book value briefly during the past quarter. Admittedly, book value will come down to reflect the losses in Berkshire's stock portfolio, so the current readings are misleadingly low. Still, even after making reasonable adjustments for the likely drop in book value, Buffett's company looks cheap -- especially when you think about its potential for near-term growth even as most other companies struggle.
Put Buffett on your side
The best thing about adding Berkshire Hathaway to your portfolio is that you get to have Warren Buffett working for you. As he continues to find tomorrow's great stock picks, you'll be in position to benefit. There's no other Buffett stock that can offer that opportunity to its shareholders.