With markets in correction territory, buying opportunities abound with many potential bargains out there. While the stock market could continue to struggle in the near term, most corrections and market crashes are followed by new highs. In the words of legendary investor Warren Buffett, investors should be fearful when others are greedy, and greedy when others are fearful.
There's no time like the present. Here are three stocks owned by Buffett's company Berkshire Hathaway that Wall Street analysts think have up to 36% upside from current levels.
1. Apple
Apple (AAPL -1.22%) makes up close to 40% of Berkshire Hathaway's roughly $350 billion equities portfolio. Buffett first bought Apple in 2016 and has largely been a buyer of the stock, aside from some selling during the pandemic.
He likes almost every aspect of Apple, including its incredibly strong brand power, the customer loyalty to products like the iPhone, and the leadership of Chief Executive Officer Tim Cook. The tens of billions the company returns to shareholders every year don't hurt, either, as we know Buffett loves passive income.
Image source: Motley Fool.
With the tech sell-off this year, Apple has struggled like many other stocks. Shares are down 16% this year and currently trade around $149. Analysts on average have a median price target for Apple of $191, which implies about 28% upside. Their high estimate is close to $220, and the low estimate is slightly more than $157.
For the most part, Apple is a decent inflation hedge because its strong brand power enables it to pass costs on to consumers. The company has accumulated some debt on its balance sheet, but given its brand power and the fact it's at the forefront of consumer technology, I do see long-term value in the stock.
2. Bank of America
The second-largest holding in Berkshire Hathaway's portfolio is Bank of America (BAC 3.35%), the second-largest bank in the U.S. by assets. Buffett first bought Bank of America in 2011 following the Great Recession. He also plowed another $2 billion into the company in the middle of 2020, while he was selling a lot of his other bank holdings.
But as investors grow increasingly concerned about a recession, Bank of America's stock is down more than 19% this year and currently trades at around $36. The median analyst price target for the shares is $49, implying about 36% upside from current levels. The low analyst price target is $37.45, and the high is around $66.
The bank is a huge beneficiary of rising interest rates because they boost the margin on its massive loan book. While a recession could stunt loan demand and increase loan losses at all banks, Bank of America has survived two big recessions in the 21st century and has a very solid balance sheet. I definitely think the bank is a good buy at these levels.
3. Chevron
Buffett and Berkshire have had an interesting relationship with Chevron (CVX 1.54%). They first purchased Chevron in 2020 during the early months of the pandemic. Then Berkshire significantly cut its stake in the first half of 2020, before buying it heavily toward the end of 2021 and in 2022 as the price of oil has significantly increased. The company has suddenly become the third-largest position in Berkshire's portfolio.
The stock has hit new highs in 2022 and is currently up more than 40% this year. Because the U.S. and many other countries banned or limited oil and gas imports from Russia, due to its invasion of Ukraine, American oil producers have become much more valuable. Chevron currently trades at about $160 per share, and the median price target among analysts is $183, implying about 14% upside. The low analyst price target is $130; the high is $213.
Chevron is in strong financial shape, with rising projections for free cash flow, and it expects to pay out more to shareholders in the coming years. The company also isn't doomed if oil prices fall, but right now its stock price might depend on oil prices holding or increasing further. The price of oil is incredibly volatile, however, and it's hard to predict how geopolitical issues will affect it.
