Please ensure Javascript is enabled for purposes of website accessibility

Here Are Warren Buffett's Favorite Coronavirus Stocks

By Keith Speights – Aug 30, 2020 at 6:12AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Plus one that should be.

If you asked Warren Buffett which stock he likes best during the coronavirus pandemic, he'd almost certainly reply that it's Berkshire Hathaway (BRK.A 0.66%) (BRK.B 0.59%). After all, the Berkshire chairman and CEO led the company to buy back more than $5 billion of its own shares in the second quarter of 2020. 

But what if you asked Buffett which stocks he likes best among companies that are developing diagnostic tests, therapies, and vaccines to fight COVID-19? To my knowledge, no one has presented this question to the billionaire investor. However, it's easy to figure out what his answer would probably be. Here are Warren Buffett's favorite coronavirus stocks -- based on where Berkshire has invested.

Warren Buffett with people in the background

Image source: Getty Images.

A very short shortlist

Buffett's shortlist of favorite coronavirus stocks is very short. There are only two stocks in Berkshire's portfolio that are directly involved in developing potential tests, treatments, or vaccines for COVID-19: Biogen (BIIB -0.17%) and Johnson & Johnson (JNJ -0.70%)

Vir Biotechnology announced in March that it planned to team up with Biogen to manufacture human monoclonal antibodies that could potentially be used in treating COVID-19. The two companies finalized an agreement in May. 

The collaboration with Vir isn't Biogen's only coronavirus-related initiative. In April, the biotech announced a consortium with Broad Institute of MIT and Harvard and Partners HealthCare to build a COVID-19 biobank. The purpose of this biobank was to help scientists in researching potential vaccines and therapies targeting COVID-19.

Johnson & Johnson's COVID-19 efforts have received more attention. The healthcare giant expanded its existing partnership with the Biomedical Advanced Research and Development Authority (BARDA) in February to accelerate research into potential COVID-19 treatments.

The bigger story for J&J, though, is its COVID-19 vaccine program. The company plans to begin large-scale late-stage testing of its COVID-19 vaccine candidate, Ad26.COV2-S, in September. On Aug, 5, J&J signed a deal with the U.S. government to supply 100 million doses of its vaccine pending FDA authorization for $1 billion.

The safer pick 

Berkshire owns a much bigger stake in Biogen than it does in Johnson & Johnson. Several years ago, Buffett became disenchanted with J&J after several missteps by the company.

But Johnson & Johnson has handily outperformed Biogen when it comes to stock performance in recent years. The gap is even wider factoring in the reinvestment of dividends that J&J pays.

Biogen could be the bigger winner in the future. However, the fortunes for the biotech largely hinge on FDA approval of aducanumab in treating Alzheimer's disease. There's a good reason to be nervous about this approval: Biogen actually came close to throwing in the towel on aducanumab last year after it flopped in a late-stage study.

Johnson & Johnson is without question the safer pick. It's a blue chip stock with a long track record of success. Unlike Biogen, J&J isn't heavily reliant on one pipeline candidate. The company is diversified across multiple areas within the healthcare sector -- consumer health, medical devices, and pharmaceuticals. 

Another coronavirus stock Buffett should like

There's another coronavirus stock that isn't currently in Berkshire's portfolio that Warren Buffett should like. Abbott Labs (ABT -0.37%) markets several COVID-19 diagnostics tests. It recently won FDA emergency use authorization for a potential game-changer with its $5 coronavirus antibody test that can deliver results in only 15 minutes.

Like J&J, Abbott is a blue chip stock with a long and storied history. It should also generate impressive growth over the next decade with products including the Freestyle Libre continuous glucose monitoring system and its COVID-19 tests. If Buffett seriously entertained adding another coronavirus-focused healthcare stock to Berkshire's holdings, Abbott would be an excellent candidate. 

Keith Speights owns shares of Berkshire Hathaway (B shares). The Motley Fool owns shares of and recommends Berkshire Hathaway (B shares) and Biogen. The Motley Fool recommends Johnson & Johnson 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 September 2020 $200 calls on Berkshire Hathaway (B shares). The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Abbott Laboratories Stock Quote
Abbott Laboratories
ABT
$105.00 (-0.37%) $0.39
Biogen Stock Quote
Biogen
BIIB
$291.41 (-0.17%) $0.49
Berkshire Hathaway (A shares) Stock Quote
Berkshire Hathaway (A shares)
BRK.A
$475,843.00 (0.66%) $3,130.99
Berkshire Hathaway (B shares) Stock Quote
Berkshire Hathaway (B shares)
BRK.B
$315.13 (0.59%) $1.86
Johnson & Johnson Stock Quote
Johnson & Johnson
JNJ
$176.09 (-0.70%) $-1.24
Vir Biotechnology Inc Stock Quote
Vir Biotechnology Inc
VIR
$27.26 (1.15%) $0.31

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

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
349%
 
S&P 500 Returns
115%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 11/30/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.