The world's most famous investor has returned to his winning ways. Warren Buffett's Berkshire Hathaway (BRK.A -0.30%) (BRK.B -0.26%) lagged well behind the S&P 500 in 2020. But the stock outpaced the index in 2021.
How will Buffett perform in the new year? I suspect that he'll do OK. Some of Berkshire's holdings are more likely to soar than others, though. Here are my picks for the three best Buffett stocks to buy for 2022.
Image source: The Motley Fool.
1. Amazon.com
Amazon.com (AMZN -1.65%) served as a drag on Buffett's performance in 2021. Shares of the internet giant rose by less than 5%, well below the gain for Berkshire itself. But one analyst thinks the stock could jump more than 30% to $4,500 in 2022. I don't know if that prediction will come true, but I wouldn't be surprised if it does.
The company has made significant investments over the past couple of years in expanding its warehouse capacity and its transportation fleet. I expect those investments to begin paying off nicely in the new year.
Amazon's year-over-year comparisons also won't be nearly as tough in 2022 as they were in 2021. However, 2020 was an outlier due to the pandemic. Look for the company to return to solid earnings growth on top of strong revenue growth over the next several quarters.
I'm most optimistic about Amazon's cloud computing business. Revenue growth continues to accelerate for Amazon Web Services. I think that momentum will continue into 2022.
Maybe Amazon won't deliver a 30%+ gain this year. But my view is that the stock is more likely to help Buffett's overall performance than hinder it.
2. Apple
What's the most important stock for Berkshire's fortunes? Apple (AAPL 0.52%). It remains by far the biggest holding in Berkshire's portfolio. Apple's gain of 35% in 2021 definitely was key in Buffett returning to the winner's column.
The company shouldn't face the supply chain disruptions experienced last year in 2022. That could help fuel higher iPhone sales. Increased adoption of 5G should also serve as a strong tailwind.
Partially as a result of these factors, Apple's services business should also deliver strong growth in the new year. The more iPhones that are used, the better Apple's App Store, Apple Music, iCloud, and other parts of its ecosystem perform.
Apple could launch the first generation of its augmented reality/virtual reality (AR/VR) headsets this year. Although headset sales will make a bigger impact in 2023, investors are forward-looking. I think Apple's long-term AR/VR opportunity should give the stock plenty of room to run in the coming years.
3. Mastercard
Like Amazon, Mastercard (MA -0.08%) weighed on Berkshire's performance in 2021. Shares of the financial services leader finished the year barely in positive territory. Don't expect Mastercard to languish for much longer, though.
Wall Street investment firm Cowen recently picked Mastercard as one of its two favorite stocks for 2022. I think that bullish sentiment is right on target.
Continued economic recovery in 2022 should work to Mastercard's advantage. In particular, as people travel more, the company's payment volumes will increase.
I also think that Mastercard Installments, the company's buy now, pay later (BNPL) program, will pick up momentum in the new year. Mastercard's BNPL solution is great for lenders because they don't have to work one-on-one with merchants. It's also easy for merchants to use. Mastercard CEO Michael Miebach said in the company's third-quarter earnings call that there has been "strong interest from players on all sides of the ecosystem."
The consensus analyst price target for Mastercard reflects a 19% upside potential. My take is that gain is quite achievable in 2022.
