We don't know much about what Warren Buffett's summer plans are (aside from probably drinking a few Cherry Cokes). But thanks to public filings, we do know what stocks one of the greatest investors of all time likes, and we can use them to inform our own investment decisions.
Here are three Buffett stocks to buy hand over fist this August.
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1. American Express
If there is any economic slowdown going on, American Express (AXP 0.07%) certainly isn't seeing it. On the company's recent second-quarter earnings call, the company reported record card member spending, with Chief Executive Officer Stephen Squeri saying that results were spurred by "a vigorous rebound in travel and entertainment spending and continued strong growth in goods and services."
Travel and entertainment spending is a major part of the company's business, so a rebound is welcome news. This strong spending led to revenue growth of 31%. The company reports that in April, travel and entertainment spending exceeded pre-pandemic levels for the first time, and Squeri does not see this spending slowing any time soon. Chief Financial Officer Jeff Campbell says that this increased travel and entertainment spending is consistent across all age groups and cohorts.
Another thing that makes American Express a viable long-term holding for Buffett and for all investors is its resonance with millennial and Generation Z consumers. The company reported an incredible 48% increase in billed business from millennial and Gen Z customers during the quarter versus the year prior. These customers will have long lifetime values for American Express, and the company will benefit as they grow with the brand and increase their income and spending in the years to come.
In addition to its strong results and its enviable position with younger consumers, American Express is reasonably valued at just 14 times forward earnings and the shares sport a 1.3% dividend yield. And how about this for a vote of confidence -- American Express has been a top Berkshire Hathaway holding since 1994, and Buffett himself purchased the stock himself nearly 50 years ago in 1964.
American Express is a longtime Buffett favorite. As of Berkshire Hathaway's most recent filing, it is the company's third-largest holding, making up about 7.8% of the total portfolio.
2. Chevron
Chevron (CVX 0.44%) is another Buffett favorite. The oil giant is Berkshire's fourth-largest holding, right after American Express, and accounts for about 7% of its overall portfolio as of the latest filings.
Energy has been a rare bright spot for the market in 2022, as shares of oil companies followed the price of oil on an upward trajectory for the first half of 2022. But prices of oil have pulled back this summer, and so have shares of top oil companies like Chevron. So while shares of Chevron are up more than 30% year to date, vastly outperforming the market and the rest of its peers in the Dow Jones Industrial Average, shares are now 15% off of their 52-week highs, making for a potentially attractive buying opportunity.
Even after the run that Chevron has had, it still trades at just 10 times earnings and an even cheaper 9 times next year's earnings. Furthermore, Chevron shares pay a dividend that yields about 3.7%. And while oil prices have declined to just below $90 a barrel, well-run oil companies like Chevron can still generate plenty of profits and free cash flow at these levels. Buffett himself has been aggressively buying shares of Occidental Petroleum (OXY -0.09%) this summer, but of the two, I prefer Chevron because of its superior dividend.
3. T-Mobile US
Lastly, mobile service provider T-Mobile US (TMUS 0.57%) isn't quite as large of a position for Berkshire as the two names above, but it is a holding and another Buffett stock that looks like a great buy this August.
During the recently reported second quarter, T-Mobile netted a total increase of 1.7 million customers across all its services, outpacing competitors like AT&T and Verizon on its way to its best-ever second-quarter total. These results make T-Mobile stand out at a time when its competitors are seeing more churn while increasing prices to deal with inflation.
What I like best about T-Mobile, and what I'm sure Buffett likes about it, is that it plans to return a jaw-dropping amount of capital to shareholders through share buybacks. CEO Mike Sievert has said that with increasing free cash flow, the company sees "upwards of $60 billion in share buybacks in 2023, 2024 and 2025." This colossal total of share repurchases would allow the company to buy back over a third of its total market cap.
Share buybacks are good for shareholders because they remove shares from the open market, making the existing shares worth more and increasing earnings per share. Reducing the share count by a third would be a boon for T-Mobile investors like Berkshire Hathaway.
Looking ahead, we can all take a page out of Buffett's playbook this August and can benefit from adding some of his top stocks to our portfolios, whether it is a global payments network like American Express riding a resurgence in travel and entertainment spending, an oil giant like Chevron paying out an attractive dividend, or a cell service provider like T-Mobile that is ready to give shareholders a boost by buying back a third of its own shares.
