Those looking to succeed in investing can have no better example than legendary Berkshire Hathaway (BRK.A -0.76%) (BRK.B -0.69%) CEO Warren Buffett. Since 1965, his company has generated compounded annual gains of more than 20%, and by the end of 2019 had increased in value by a massive 2,744,062%.
The Oracle of Omaha is well known for one of his most sage pieces of investing advice:
I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.
The investing atmosphere has been rife with fear over the past couple of months, making this a prime opportunity to follow Buffett's advice. With that in mind, let's look at several stocks in Berkshire's portfolio that might be particularly appealing picks to buy now in anticipation of the post-coronavirus rebound.
Image source: The Motley Fool.
The model Buffett stock
Lest there be any doubt, one company -- more than any other -- is the quintessential Buffett stock: Berkshire Hathaway itself.
So far in 2020, both classes of Berkshire Hathaway stock have fallen by about 17% (as of this writing), dropping the company to its cheapest price-to-book level in more than a decade and placing it clearly in value stock territory. The decline has also taken the stock below a key metric that Buffett has long said is the threshold at which he would have Berkshire Hathaway repurchase some of its shares -- 1.2 times book value. That being that case, it's likely that those stock buybacks have commenced, though there's no way to know for sure until the quarterly regulatory filings are released.
But there's another reason Berkshire Hathaway is a compelling buy right now. It was sitting on a mountain of cash before the coronavirus pandemic, with about $125 billion in cash and short-term securities on the books as of the end of 2019. Since then, Buffett has tapped the European bond market by issuing euro-denominated bonds bringing in about $1.1 billion at a 0% interest rate, and he plans to issue additional bonds in Japan as well.
Buffett's move to load up on cash is leading many to wonder if a massive acquisition is in the works, or if he just believes he can get a better return. Either way, the Oracle of Omaha is right at home during a stock market crash, so he's no doubt making moves that will benefit Berkshire in the longer term.
Image source: Apple.
This company turned Buffett's head
While Buffett's roster of investments is likely laden with bargains right now, there's little doubt that Apple (AAPL -0.35%) might be among the most compelling. That's not to say the stock is the cheapest by any means, but it may represent one of the biggest opportunities.
It wasn't actually Buffett, but one of his top lieutenants -- Todd Combs or Ted Weschler -- who first brought Apple into the Berkshire fold in early 2016. Buffett grew intrigued by the purchase, and soon began buying Apple shares hand over fist. As of the end of 2019, Berkshire owned a 5.6% stake in Apple -- roughly 250 million shares -- but that stake could be even higher by now.
Apple's stock is now more than 12% lower than where it traded when the bear market began, but it was down by more than 30% in late March, putting it squarely in bargain territory. This also pushed up Apple's dividend yield: It's currently about 1.13%, but it was briefly above 1.35% in March, which would have enhanced the stock's appeal.
There could be more to come as Apple historically announces updates to its capital allocation policy in conjunction with its second-quarter earnings report, which is scheduled for later this month. Apple is widely expected to raise its dividend again -- it has done so every year since it reinstituted payouts in mid-2012, and has more than doubled its quarterly distribution over the past eight years.
Apple has more than $90 billion in net cash on its balance sheet and uses less 25% of its profits to support its dividend, so its payouts are unlikely to be at risk -- and Buffett's fondness for dividends is well documented. He also hasn't been bashful about his feelings on Apple stock. Though he owns more than 5% of the company, he said a couple of years ago "I'd love to own 100% of it."
Image source: Amazon.
The one Buffett thought got away
Investors may not immediately think of Amazon (AMZN 3.43%) as fitting within the Buffett mold, but he watched it from the sidelines for years, and he has been vocal about the opportunity he missed.
Amazon has "far surpassed anything I would have dreamt could have been done. Because if I really felt it could have been done, I should have bought it," Buffett said. "I had no idea that it had the potential. I blew it." It's important to note that it wasn't Buffett himself who finally took the plunge and put the e-commerce giant into Berkshire's portfolio, but "one of the fellows in the office that manage money" -- likely a reference to Combs or Weschler. Buffett chided himself even further, saying, "I'm a fan, and I've been an idiot for not buying."
Berkshire made its first investment in Amazon in May 2019, and raised its holdings by 11% to 537,300 shares later in the year. While that stake was worth less than $1 billion as of the end of the year, it has since grown in value to nearly $1.23 billion.
Amazon has held up well during the pandemic, with its stock gaining more than 5%, compared to a decline of more than 16% by the S&P 500. E-commerce has become a necessity rather than a luxury in the wake of stay-at-home orders, and in two separate statements, Amazon has announced plans to hire as many as 175,000 workers to meet the unprecedented demand.
While it's the worldwide leader in e-commerce, much of the company's growth will come from another segment -- Amazon Web Services (AWS) -- its cloud computing operation, which carries as impressive 26% operating income margin. Add in other high-growth areas like streaming video, digital advertising, and cashier-less retail checkout technology, and it's easy to chart an impressive path forward for Amazon.
