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2 Warren Buffett Stocks I Bought in April -- and Why I Plan to Buy More Shares in May

By Keith Speights – May 3, 2020 at 7:31AM

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They're two of the legendary investor's favorite stocks.

I bought several stocks in both March and April. The stock market meltdown presented too tempting of an opportunity to invest in great companies at attractive prices. Even as the market rebounded, I still saw plenty of stocks that I liked.

Two stocks that I bought in April were the kinds of stocks that Warren Buffett would love. Actually, they're stocks that he already loves. Here are those two Buffett stocks that I added to my portfolio last month -- and why I plan to scoop even more shares in May.

Warren Buffett with people in background

Image source: The Motley Fool.

1. The biggest Buffett stock of all

There was one Warren Buffett stock that I absolutely, positively had to buy last month. It's the biggest Buffett stock of all -- Berkshire Hathaway (BRK.A -0.83%) (BRK.B -0.40%). Just to set the record straight, I purchased Berkshire's class B shares. They're a tad bit more affordable than the class A stock, which currently has a price tag of a cool $274,000 per share.

For much of his career, Warren Buffett was known as a value investor. He studied under Benjamin Graham, who wrote the classic value investing book The Intelligent Investor. While Buffett isn't as value-oriented as he used to be, he still believes in making sure he gets a good deal with any stock he buys. My top reason for buying Berkshire Hathaway shares in April was that I felt that the stock offered a compellingly attractive valuation.

Ben Graham was a big fan of looking at a company's book value to determine if its shares were worth buying. Evaluating book values isn't as fashionable these days but it still deserves consideration, in my view. Berkshire trades at just a little over its book value. What's more, the stock was and still is well below its levels in 2019 when Berkshire was spending billions of dollars to buy back its shares. 

We don't know yet all of the stocks that Berkshire itself bought during the recent stock market crash. I suspect, though, that the company invested some of its massive $125 billion cash stockpile. And I think that the stocks that Berkshire purchased will deliver solid long-term returns just like most of the company's investments in the past have.

2. Buffett's No. 1 bank stock

You'd nearly run out of fingers counting the number of bank stocks in Berkshire's investment portfolio. Warren Buffett really likes banks. And there's one bank that stands as his No. 1 pick -- Bank of America (BAC -1.42%).

Berkshire owns more shares of Bank of America than it does of any other bank. Bank of America is the holding company's second-biggest position overall, trailing only Apple. However, I didn't buy Bank of America shares merely because Buffett likes the stock.

Valuation was yet again my top criterion. Bank of America shares trade below book value. The stock is still close to 35% below its highs from earlier this year and was even cheaper when I bought it last month.

Granted, all banks will likely face significant challenges throughout the rest of this year. The response to the COVID-19 pandemic has led to a huge spike in unemployment and caused some businesses to close or be at the brink of doing so. This could lead to a higher default rate for banks. Super-low interest rates also don't help matters.

However, my view is that Bank of America is one of the strongest major banks around. It boasts a solid balance sheet. The company isn't laying off any staff and even hired 2,000 new people in March. I look for Bank of America to thrive once the healthcare crisis and its aftermath are in the rearview mirror.  

More in May

While I staked out initial positions in Berkshire Hathaway and Bank of America in April, I play to buy more shares of both companies in May and in future months as well. My strategy is to buy incremental stakes rather than fully invest in one fell swoop.

This approach reflects my acknowledgment that I don't know what's going to happen with the economy or the stock market. The nice rebound we're seeing now could continue. However, we could also experience another market downturn. I'm confident, though, that Berkshire and Bank of America will deliver market-beating returns over the long run. 

Keith Speights owns shares of Apple, Bank of America, and Berkshire Hathaway (B shares). The Motley Fool owns shares of and recommends Apple and Berkshire Hathaway (B shares) and recommends the following options: long January 2021 $200 calls on Berkshire Hathaway (B shares), short January 2021 $200 puts on Berkshire Hathaway (B shares), and short June 2020 $205 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.

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Stocks Mentioned

Bank of America Stock Quote
Bank of America
BAC
$31.92 (-1.42%) $0.46
Berkshire Hathaway (B shares) Stock Quote
Berkshire Hathaway (B shares)
BRK.B
$279.36 (-0.40%) $-1.13
Berkshire Hathaway (A shares) Stock Quote
Berkshire Hathaway (A shares)
BRK.A
$420,667.49 (-0.83%) $-3,512.51
Apple Stock Quote
Apple
AAPL
$146.40 (0.20%) $0.30

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

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