When Berkshire Hathaway (BRK.A 0.55%) (BRK.B 0.49%) CEO Warren Buffett speaks, Wall Street and investors pay close attention. That's because the Oracle of Omaha, as Buffett has come to be known, has a remarkable history of making money.
Since taking the helm as CEO of Berkshire in 1965, Buffett has overseen the creation of more than $760 billion in shareholder value. In terms of percentages, the aggregate value of Berkshire Hathaway's Class A shares (BRK.A) is up 4,184,213% since 1965. In other words, riding Warren Buffett's coattails has long been a moneymaking strategy.
At the moment, Berkshire Hathaway's portfolio consists of nearly four dozen securities. While many of these investments should perform just fine over the long run, three of these Buffett stocks stand out as screaming buys in April.
The first surefire Warren Buffett stock that can drive investors to solid gains in April and likely well beyond is auto giant General Motors (GM 2.71%).
There are a couple of factors weighing on GM at the moment. To begin with, the entire auto industry is contending with semiconductor-chip shortages and other supply-chain issues. These supply concerns have caused GM and its peers to scale back production or halt/slow expansion opportunities.
There's also concern about the rising-rate environment and what that might do to auto loan demand. Though these are tangible worries for short-term traders, they're not something that should be of any concern to patient investors.
For General Motors, its long-awaited shot in the arm of organic growth has arrived. The electrification of consumer vehicles and enterprise fleets presents a multidecade vehicle-replacement cycle that should lead to above-average sales and profit growth for GM and the industry. Understanding how important this pivotal shift to electric vehicles (EVs) is, GM upped its investment in EVs, autonomous vehicles, and batteries to $35 billion through 2025.
General Motors' goals are ambitious but well within the realm of achievable. According to CEO Mary Barra, the company aims to launch 30 new EVs globally by the end of 2025, with the goal of producing more than 1 million EVs annually in North America by mid-decade. A majority of these EVs will be trucks, which generate juicier margins than sedans and are the perfect pivot with gasoline and diesel prices soaring.
Something else to consider is that General Motors has a well-known brand in markets outside the United States. In particular, the company has delivered 2.9 million vehicles in China, the world's No. 1 auto market, in back-to-back years. GM's deep pockets, well-known brand, and existing infrastructure should allow it to become a major player in China's nascent EV market.
Even if near-term profit estimates fade a bit due to chip/part shortages and/or interest-rate uncertainty, General Motors remains an absolute bargain at roughly six to seven times Wall Street's forecast earnings for 2022 and 2023.
Another surefire Warren Buffett holding that's begging to be bought in April is telecom stock Verizon (VZ 0.52%).
Many of the big names in telecom have come under pressure over the past year on the idea that interest rates will need to rise significantly to corral historically high levels of inflation. Since Verizon is lugging around quite a bit of debt, and access to cheap capital could quickly dwindle, investors have taken a cautious stance. But this trepidation can be your opportunity to nab a great deal.
Although Verizon has been a slow-growing company in recent years, it does have two clear organic growth catalysts in plain sight that could reasonably lift its valuation.
First, there's the ongoing rollout of 5G wireless infrastructure. Verizon noted in January that it was planning to spend between $5 billion and $6 billion this year to build out 5G in initial markets and prepare for the next round of 5G expansion. Keep in mind that it's been a decade since wireless download speeds were meaningfully improved.
Access to faster download speeds should entice a multiyear consumer and enterprise device-replacement cycle. Since Verizon generates its juiciest margins from data consumption, 5G is an investment that shouldn't take much time to pay off handsomely for the company's wireless segment.
The second big catalyst for Verizon is its acquisition of 5G mid-band spectrum last year. Buying this mid-band spectrum is essential for the company's 5G at-home broadband services push. The company's goal is to have its 5G at-home broadband services in 30 million homes by the end of 2023. Even though broadband isn't the high-growth trend it was in the 2000s, it's still a steady producer of cash flow and can encourage add-on sales for existing wireless subscribers.
If you need a few more good reasons to buy Verizon right now, consider its valuation and dividend. This is a company that's averaged a forward price-to-earnings ratio of 11.5 and a dividend yield of a little over 4% over the past five years. Investors can currently buy shares of Verizon for about nine times forward-year earnings and will receive an almost 5% dividend yield for their patience.
Bank of America
The third surefire Warren Buffett stock that stands out as a screaming buy in April is Bank of America (BAC 0.50%). BofA is Berkshire Hathaway's second-largest holding.
Not to sound like a broken record, but bank stocks have been under pressure in recent weeks as a result of interest-rate movements. But rather than worrying specifically about a rising-rate environment, Wall Street and investors appear most concerned about the inversion of the two-year and 10-year U.S. Treasury yields. While not every yield-curve inversion is followed by a recession, every recession dating back multiple decades has been preceded by a two-year/10-year yield-curve inversion.
Interestingly, though, the cyclical nature of the banking industry can actually be viewed as a positive if you're a long-term investor. Despite recessions being an inevitable part of the economic cycle, periods of contraction often last for only a few months or a couple of quarters.
By comparison, economic expansions are measured in years. This means bank stocks like BofA tend to benefit from the natural expansion of the U.S. economy over time.
What makes Bank of America such an intriguing investment opportunity at the moment is its interest-rate sensitivity. No big bank stands to benefit more from a rising-rate environment than BofA. When the company reported its year-end results in January, it noted that a 100 basis-point parallel shift in the interest-rate yield curve would bring in an estimated $6.5 billion in added net interest income over the next 12 months. With the nation's central bank forecasting north of 100 basis points in cumulative hikes in 2022, Bank of America is potentially set for a windfall of extra interest income.
Also, as I've previously pointed out, Bank of America's digitization efforts are progressing nicely. Over the past three years, the company has increased its active digital banking users by 5 million to 41 million and has seen the percentage of sales completed digitally jump from 31% to 49% over the same stretch. Digital transactions are substantially cheaper for the company than in-person or phone-based interactions.
With profits expected to jump considerably over the next two years, Bank of America's recent pullback is the ideal time for opportunistic investors to go shopping.