Warren Buffett is widely known as one of the greatest investors of all time. His company Berkshire Hathaway (BRK.A -0.31%) (BRK.B -0.19%) has crushed the market over many decades, with its stock price generating gains far outpacing the S&P 500 between 1965 and 2021.
A big reason for this is Berkshire Hathaway's $319 billion-plus equities portfolio, in which Buffett, Charlie Munger, and the rest of Berkshire's stock-picking team buy and sell stakes in various companies.
Buffett is widely known for finding stocks that trade at less than their intrinsic value and getting in early. Berkshire has also been active recently on the investing front, deploying more than $57 billion into stocks this year.
It's always a good idea to monitor Berkshire's picks (not that you shouldn't do your own due diligence), because they could be great long-term plays, given the smart people behind these investments. It also doesn't hurt if professional analysts on Wall Street also like these stocks and see future stock price appreciation. With that said, here are three Warren Buffett stocks that Wall Street thinks could rise as much as 34% to 100% in the next 12 to 18 months.
1. Bank of America
Berkshire has stuck with Bank of America (BAC 1.59%) even in the most difficult of times. As the conglomerate sold many of its bank holdings during the early months of the pandemic, Berkshire loaded up on Bank of America, purchasing more than $2 billion of the stock in 12 days of trading, showing that Buffett has all the faith in the world in CEO Brian Moynihan.
Banks are very linked to the broader state of the economy, so concerns that the Federal Reserve's interest rate hikes may push the economy into a recession have hurt the stock this year. But banking can also be a play on interest rates, which will increase a bank's net interest income (NII), the profits banks make on loans and securities after funding those assets. Bank of America is a huge beneficiary of rate hikes, with its large commercial lending franchise that will see loan yields reprice higher and a stable low-cost deposit base.
Bank of America has already started to see NII, a main revenue source of most banks, start to show signs of life in the second quarter, but NII is only expected to accelerate in the back half of this year. Banks are also much better capitalized and prepared for a downturn than they were heading into the Great Recession.
Bank of America's stock currently trades at about $30.60 per share. Analysts have set a median 12-month price target of $41, which implies about 34% upside. The high price target, however, is $55, with the low estimate at $34. So Wall Street does not expect investors to lose money with the stock where it is, and there is potential for almost 80% upside in the best-case scenario.
2. Amazon
Amazon's (AMZN 1.07%) stock has struggled this year, as investors worry about the effect inflation and a more severe recession could have on the business, but it's hard to stay down on the e-commerce juggernaut for too long.
The company that Jeff Bezos initially started as an online book store has developed several huge business lines, not to mention becoming the go-to spot for online purchases. Amazon Prime, which offers a range of services from free shipping to Prime Video, has amassed more than 200 million customers in 22 different countries, providing a steady source of annual recurring revenue.
Amazon Web Services (AWS), which provides cloud computing on demand, has become the largest cloud provider in the world, with a network of more than 100,000 systems integrators and independent software vendors that run or integrate their technology on AWS. Through the first half of 2022, AWS' operating income has grown more than 46% from the first half of 2021.
Amazon's stock currently trades at around $114.40 per share. The median analyst price target is $172, suggesting roughly 50% upside over the next 12 months. The high estimate of $215 per share suggests nearly 88% upside, while the low estimate of $110 does suggest some slight downside.
3. Citigroup
The embattled bank Citigroup (C 2.77%) has had a difficult few years, as returns have continued to disappoint shareholders and the bank has also gotten into trouble with regulators for failing to correct longstanding issues with its internal controls.
The good news is that CEO Jane Fraser's transformation plan finally seems to have caught the eye of Buffett. Earlier this year, Berkshire purchased more than 55 million shares of the bank, which currently amounts to nearly 3% of outstanding shares. For more than two decades, Buffett, a big-time bank investor, has never shown any interest in Citigroup. During this time, Berkshire has invested in pretty much every other major Wall Street bank.
But now Citigroup is pledging to get simpler, selling off its international consumer banking operations and focusing more on wealth management and investment banking, which will make it more capital-efficient as well. Citigroup has all the makings of a Buffett value play. There is a transformation plan in place. The bank trades at a bargain valuation of just 53% of its tangible book value, or net worth, and pays a handsome 4.74% annual dividend yield.
Citigroup trades at about $42.60 per share. With a median analyst price target of roughly $68 per share, that implies close to 60% upside over the next 12 months. The low estimate is $46 and the high is $86, presenting a potential 100% gain in a best-case scenario.
