Few investors have a more impressive track record of making money than Berkshire Hathaway (BRK.A 0.39%) (BRK.B 0.43%) CEO Warren Buffett. The Oracle of Omaha, as he's come to be known, has built up his net worth from $10,000 to $113 billion over seven decades. Keep in mind that this $113 billion figure doesn't account for the $41 billion he's donated to charity over the past 15 years.
The gains have arguably been even more impressive for his company's shareholders. Since taking over as CEO in 1965, Buffett has overseen the creation of more than $700 billion in market value, as well as a better than 3,800,000% gain in Berkshire Hathaway's Class A shares (BRK.A). That's an average annual return of more than 20% for 57 years (and counting).
In other words, riding the Oracle of Omaha's coattails has been a profitable proposition for a long time. With stocks enduring their steepest pullback in nearly two years last month, the following three Warren Buffett stocks can confidently be bought hand over fist in February.
Bank of America
First up is money-center giant Bank of America (BAC -0.14%). BofA is Berkshire Hathaway's second-largest holding and comprises 13.8% of the company's $351 billion investment portfolio.
Historically, bank stocks are highly cyclical businesses, and rarely a place for investors to retreat when market volatility picks up. But in this particular instance, we're entering the sweet spot of the banking industry growth cycle. That's because the nation's central bank has switched its stance on monetary policy in the wake of historically high inflation.
According to the tea leaves laid out by the Federal Reserve, multiple interest rate hikes could be on their way in 2022 and 2023. No bank stock is more interest-sensitive than Bank of America. Rising rates would positively impact the company's outstanding variable-rate loans, thereby generating additional net interest income that'll flow directly to its bottom line. According to BofA's year-end operating results, a 100-basis-point parallel shift in the interest rate yield curve would produce an estimated $6.5 billion in net interest income over the next 12 months. Put another way, a 1% increase in prevailing interest rates could lift BofA's full-year earnings per share by approximately $0.80.
Something else to consider is that bank stocks like BofA tend to get more aggressive with their capital return strategies when profits are on the rise. CEO Brian Moynihan has not been shy about repurchasing stock or increasing his company's dividend, with approval from the Fed. If multiple interest rate hikes come to fruition, a more bountiful shareholder return program should be expected by late June.
Also, as I've previously pointed out, Bank of America has done an excellent job of funneling new and existing customers to digital sales channels. When the curtain closed on 2021, BofA had 41 million active digital users, up 5 million from three years' prior. What's more, 49% of fourth-quarter sales were completed online or via mobile app, up from 31% in Q4 2018. The point being that digital transactions are markedly cheaper for the company than in-person or phone-based interactions. As transactions go digital, BofA has been able to consolidate some of its branches and improve its operating efficiency.
Bristol Myers Squibb
A second Warren Buffett stock to buy hand over fist in February is pharmaceutical company Bristol Myers Squibb (BMY 0.44%).
When volatility picks up in the stock market, healthcare stocks are often a smart place to put your money to work. Since people don't get to choose when they get sick or what type of illness they develop, there's a steady demand for prescription drugs, medical devices, and healthcare services in any environment. Even if the stock market were to dip significantly from where it is now, patients will still need the therapies provided by Bristol Myers Squibb.
On a more company-specific basis, Bristol Myers has brought organic and acquisitive growth to the table. In terms of the former, it's generating a mountain of annual revenue from blood thinner Eliquis, which was developed in cooperation with Pfizer, and cancer immunotherapy Opdivo. Opdivo is particularly intriguing given its label expansion opportunities. Eliquis and Opdivo were respectively on track for more than $10 billion and north of $7 billion in full-year sales in 2021.
Bristol Myers also made waves when it closed on the mammoth buyout of immunology and cancer-drug developer Celgene in late 2019. This acquisition brought blockbuster multiple myeloma treatment Revlimid into the fold. Revlimid was pacing $13 billion in full-year sales in 2021 and is protected from a full launch of generic entrants for four more years. In short, it's a cash flow cow for the company.
Speaking of cash flow, Bristol Myers Squibb significantly expanded its shareholder return program in December. The company's quarterly dividend was increased by about 10%, with the share repurchase program given a $15 billion jolt in the arm. If the entirety of the company's $15.2 billion in authorized repurchases were put to use, its share count could be reduced by more than 10%.
With Bristol Myers Squibb valued well below its five-year average for forward earnings, cash flow, and book value, it looks like a screaming buy.
The third Buffett stock that can drive big gains in February and beyond is auto juggernaut General Motors (GM 1.47%).
Similar to bank stocks, you typically wouldn't pour cash into auto stocks as a safety valve during periods of volatility. But given General Motors' already inexpensive valuation, as well as the multidecade growth opportunity on its doorstep, it's a stock patient investors can buy with confidence.
Despite the inherently cyclical nature of the auto industry, the push to electrify consumer vehicles and enterprise fleets can yield sustainably strong growth for GM and its peers for a long time to come. Replacing vehicles isn't going to happen overnight. Yet the global push to reduce our carbon footprint is only going to escalate as time passes. For investors with time on their side, growth in electric vehicles (EVs) is a no-brainer opportunity.
For its part, General Motors upped its commitment to spending on EVs, autonomous vehicles, and batteries, to $35 billion this past June. CEO Mary Barra sees EV production capacity in North America topping 1 million annually by the end of 2025, with the company on track to launch 30 EVs globally by mid-decade.
Although it's early, demand for key next-gen products appears strong. Keeping in mind that the fully refundable deposit is only $100, Barra noted that Chevy Silverado EV pre-orders topped 110,000 since its unveiling just a month earlier.
General Motors has an inside track to garnering sizable EV share in China, too. In each of the past two years, GM has delivered approximately 2.9 million vehicles in the world's largest auto market. It shouldn't have any trouble steadily shifting its focus to EVs in a country ripe for disruption.
At less than 8 times Wall Street's forecast earnings for 2022, General Motors is a dangling carrot for value stock investors.