Few investors have a nose for making money quite like billionaire Warren Buffett. Since becoming CEO of conglomerate Berkshire Hathaway (BRK.A -0.48%) (BRK.B -0.81%) in 1965, the Oracle of Omaha, as he's come to be known, has created more than $610 billion in value for shareholders and delivered an aggregate return on his company's Class A shares (BRK.A) of 3,641,613%, through Dec. 31, 2021.
Even though Buffett isn't infallible, riding his coattails has been a proven recipe to outperform the benchmark S&P 500 for more than a half-century.
Berkshire Hathaway CEO Warren Buffett. Image source: The Motley Fool.
As we push into the second half of what's been an exceptionally volatile and challenging year for investors, several Berkshire Hathaway holdings stand out as amazing values. The following three Warren Buffett stocks can all be confidently bought hand over fist in July.
Bank of America
The first Buffett stock that's begging to be bought in July is money-center giant Bank of America (BAC 0.03%).
Usually, bank stocks are an industry to avoid when the broader market is mired in a double-digit decline. However, this time is different. It's the first time ever that the U.S.'s central bank has aggressively raised interest rates into a plunging stock market.
Under normal circumstances, we'd expect the Federal Reserve to lower interest rates in order to spur lending and support the U.S. economy and stock market. Doing so lowers the net-interest-income-earning potential for bank stocks like BofA. But with the Fed increasing its fed funds target rate by 150 basis points in just the past three meetings, bank stocks are poised to benefit from a significant uptick in net-interest income.
Among big-bank stocks, none is more interest-sensitive than Bank of America. In April, when the company reported its first-quarter operating results, BofA noted it would generate an estimated $5.4 billion in added net-interest income with a 100-basis-point parallel shift in the interest rate yield curve. By 2022's end, we could see a 300-basis-point (or higher) jump in the fed funds rate.
Bank of America has also benefited from its consistent investments in technology and digitization. Over a three-year stretch, the number of active digital users has grown by 5 million to 42 million. More importantly, 53% of all first-quarter loan sales were completed online or via mobile app, which is up from 30% in the comparable quarter in 2019. Digital sales are considerably cheaper for the company than in-person or phone-based interactions. It's this digital push that's allowed BofA to consolidate some of its branches to lower its noninterest expenses.
If you need one more good reason to sink your teeth into Bank of America, take a closer look at its valuation. Whereas most companies are likely to endure a near-term earnings decline, BofA's earnings per share could grow by close to 20% in 2023. With shares trading close to book value and roughly eight times Wall Street's forecast earnings for the upcoming year, Bank of America just might be the best deal in Buffett's entire portfolio.
Activision Blizzard
A second Warren Buffett stock investors can confidently scoop up in July is gaming giant Activision Blizzard (ATVI).
Like most tech stocks, Activision has a cloud of uncertainty following it. However, it has its own unique set of concerns beyond just historically high inflation, the rising prospect of a domestic recession, and rising interest rates closing off access to historically cheap capital. In Activision's case, it's faced multiple lawsuits covering allegations of discrimination and sexual harassment in the workplace.
To make matters worse, the company delayed the release of a number of key games expected to drive new users into its ecosystem. First-person shooter game Overwatch 2 and action role-playing game Diablo IV had their respective release dates pushed back to the fourth quarter of 2022 and sometime in 2023.
However, these snafus have arguably rolled out the red carpet for opportunistic investors. For instance, the company's litigation should be resolved soon.
Activision ended March with 372 million monthly active users (MAUs). Although down from the year-ago period, MAUs tied to its King subsidiary, the home of Candy Crush, have held up particularly well. The upcoming releases of key games in the second half of 2022 and into 2023 should reignite MAU growth in the Activision segment.
Even more important is the fact that Microsoft (MSFT 0.22%) has made a $68.7 billion all-cash offer to acquire Activision Blizzard at $95 a share. Aside from becoming even more influential in the gaming space with this deal, Microsoft plans to use Activision as a launching point to further its metaverse ambitions. The metaverse is the next iteration of the internet, which allows connected users to interact with each other and their surroundings in 3D virtual worlds.
Thus far, it doesn't appear that Activision and Microsoft have run into snags with U.S. regulators regarding the deal. This is noteworthy given that Activision Blizzard's stock ended last week below $78 a share. If Microsoft closes this deal in 2022, as anticipated, Activision shareholders could nab a quick 22% arbitrage opportunity. This is precisely why Warren Buffett's company purchased a roughly 9.5% stake in Activision.
The Wuling Hong Guang Mini Cabrio EV. Image source: General Motors.
General Motors
A third and final Warren Buffett stock to buy hand over fist in July is automaker General Motors (GM -0.22%).
You could say that what can go wrong has gone wrong for the auto industry in 2022. Semiconductor chip shortages and COVID-19 lockdowns in select international markets, such as China, have disrupted supply chains. Historically high inflation on the materials used to make vehicles is eating into auto margins. Yet in spite of these headwinds, GM has the drive to make long-term investors richer.
After many years of waiting on the next big organic growth opportunity for auto stocks, it's finally arrived. The electrification of automobiles should result in consumers and businesses changing or upgrading vehicles for decades to come.
For its part, General Motors has spared no expense. The company anticipates spending an aggregate of $35 billion through 2025 on electric vehicles (EVs), autonomous vehicles, and batteries. It expects to have two fully dedicated battery plants up and running by the end of next year, with a goal of producing at least 1 million EVs annually in North America by 2025. In total, 30 new EVs are expected to be launched globally by the end of 2025.
Initial figures suggest there's a lot of interest in GM's EV products. When GM released its first-quarter operating results on April 26, CEO Mary Barra noted in her letter to shareholders that approximately 140,000 retail reservations for the Chevy Silverado EV had already been placed. The Silverado EV was only introduced by Barra in January 2022.
General Motors also has a real shot to become a key player in China's EV market. China is the largest auto market in the world. Aside from the fact that GM has an established presence in China -- it delivered 2.9 million vehicles in both 2020 and 2021 -- it and its joint venture partners already have the best-selling EV in the country, the Wuling Hong Guang Mini EV.
With an extensive growth opportunity on its doorstep, General Motors is an incredible deal at only five times Wall Street's forecast earnings for 2022 and 2023.
