Warren Buffett's advice is always in demand, but even more so when the market is down and investors are looking for methods to safeguard their money and even increase it. Buffett is a proponent of value investing, and value stocks tend to perform better than growth stocks in challenging markets. Many value stocks are outperforming the market now, as are many Buffett stocks. As 2022 comes closer to its end, it's a great time to grab shares of some these high-quality stocks that should be able to pull your portfolio through any markets. Amazon (AMZN -2.44%), Coca-Cola (KO 1.38%), and American Express (AXP 5.46%) are three great options.
A not-so-typical Buffett stock
As a tech stock with a high valuation, Amazon isn't the kind of stock you usually see in Berkshire Hathaway's (BRK.A 0.74%) (BRK.B 1.09%) portfolio. But even Buffett himself said he missed the boat on Amazon, and it's likely that one of his investment managers purchased the stock for the holding company when it first took a position in 2019.
That was way after the incredible gains Amazon has made for investors since it went public in 1997. But it's a big vote of confidence for what Amazon can still do to create shareholder wealth in the future. It was actually just prior to the pandemic when Amazon's sales shot up.
Amazon is in a difficult position now as it faces challenges keeping up the pace after such high growth, in addition to scaling back down after beefing up to meet demand. That's on top of the inflation and overall economic pressure plaguing most retailers.
But Amazon still has tons of potential between its core e-commerce business with more than 200 million Prime members, Amazon Web Services (AWS), and its many smaller businesses.
Amazon stock is down 44% in 2022, sorely underperforming the market's 15% decline. It's an incredible opportunity to buy shares before they pop. With the market possibly shifting back to growth in 2023, now could be a great time to buy.
The longest-held Buffett stock
Buffett first bought Coca-Cola stock in 1988, which means he has owned shares for 34 years. It also means he has enjoyed it until now, and has confidence in its ability to continue creating shareholder value.
Coca-Cola is a Dividend King, which means it's been issuing and raising its dividend for at least 50 consecutive years. It has raised its dividend for the past 60 years, one of the longest streaks on the market. It's a rock-solid company, with high cash generation and efficient distribution networks that keep its products on shelves globally, as well as a loyal fan base that takes them off shelves consistently.
The company has been demonstrating exceptional performance over the past few quarters, posting double-digit sales growth and robust earnings as it moves forward from the pandemic. It was beginning to slow down even before the pandemic, and then it made extensive operational changes in light of shifting pandemic trends. These have breathed fresh life into the company, and are now powering its progress.
Due to the "flight to safety" phenomenon, where investors have been putting their funds into secure value stocks this year, Coca-Cola has been outperforming the market, gaining 8% in 2022. Despite that, its valuation is holding at regular historical levels, with the stock trading at 28 times trailing 12-month earnings. With this valuation combined with strong performance, it's a top stock to hold to bolster your portfolio as we exit 2022.
The classic Buffett stock
American Express is also a longtime Buffett stock, having been an equity position in Berkshire Hathaway since 1993. It has posted incredible performance in 2022, with a 24% increase in sales over last year in the third quarter. It also has a strong moat, one of Buffett's most important factors when looking for a great company, in its premium reward schedule, which attracts an affluent clientele. These loyal customers have more money than average to spend, and they generate strong sales and earnings. American Express also charges annual fees for most of its credit cards, which are a significant addition to the bottom line.
American Express is well-positioned to keep sales growing in 2023 and beyond, capturing a new, young cohort who are signing up for cards and engaging with the platform. It has also expanded its fintech services, and is finding new business in these commercial solutions. The growth pipeline is strong between the interrelated but wide-reaching parts of its businesses.
American Express is a classic Buffett stock because it is well-established, pays a dividend, and demonstrates sustained growth levels over long periods, and its stock is cheap. Shares trade at only 16 times trailing 12-month sales. It's a great stock that could soar in 2023 and protect your portfolio in the long term.
