2 Warren Buffett Stocks to Buy Before 2022 Ends and 1 to Avoid

Warren Buffett is one of the most successful stock investors of all time, which makes the quarterly regulatory filings from his conglomerate, Berkshire Hathaway (BRK.A 0.64%) (BRK.B 0.54%), an excellent resource for investing inspiration. Buffett has proven the value of investing in strong businesses for the long haul. For instance, if you had invested $10,000 in Apple (AAPL -0.57%) when Buffett did in 2016, your stake would be worth about $62,480 today.

There's never a bad time to try putting Buffett's investment strategy into action. But as we head to the end of 2022, not all of his portfolio holdings look like such excellent bargains. Here are two Buffett stocks to buy hand over fist in December and one to avoid.

Buffett stock No. 1 to buy: Apple

By far, Buffett's favorite stock holding is Apple. The iPhone manufacturer's shares account for an overwhelming 39.2% of Berkshire Hathaway's portfolio, and its 5.8% stake in the tech company is worth $135.3 billion.

Apple is one of the best growth stocks out there. Its share price rose by 249% in the last five years, even factoring in its 2022 sell-off. In its latest reported fiscal quarter, Apple reported an 8.1% year-over-year rise in revenue to $90.15 billion and operating income that increased by 4.6% to $24.89 billion. After a year fraught with economic declines that stunted consumer spending across the tech world, demand has remained high for Apple's offerings.

For instance, according to IDC, worldwide smartphone shipments declined by 9.7% in the last year, but Apple reported 9.6% revenue growth in its iPhone segment, with sales hitting $42.6 billion in its fiscal 2022 fourth quarter, which ended Sept. 24. Additionally, while overall PC shipments fell by 15%, Apple enjoyed a 25.3% rise in revenue for its Mac segment to $11.5 billion. It also generated $111.4 billion in free cash flow over the past 12 months.

While Apple's price-to-earnings ratio of 24 is considerably higher than the 2019 all-time low of 11.7, the figure is still 25% below what it was on Dec. 10, 2021, making now an excellent time to buy shares in the tech titan before the new year.

Buffett stock No. 2 to buy: Activision 

Activision Blizzard (ATVI) shares make up 1.3% of the value of Berkshire Hathaway's portfolio -- its 7.7% stake in this company is worth $4.5 billion. 

The video game giant was the subject of numerous headlines this year after Microsoft (MSFT -1.84%) announced in January it planned to acquire it in an all-cash deal valued at $68.7 billion or $95 per share. Based on that offer, buying Activision stock at Friday's closing price of $75.76 a share would yield a 25% return on your investment once the deal completes. 

However, the transaction has been held up by a lengthy regulatory process as officials in different countries consider whether the deal violates their antitrust laws. Microsoft is currently preparing to defend the acquisition against an EU antitrust probe and the US Federal Trade Commission, which Bloomberg reports is likely to file a lawsuit blocking the deal.

At this point, no one can be 100% certain that the deal will go through, but Buffett seems to believe it will. Berkshire Hathaway added to its stake in the company after the acquisition announcement. 

However, regardless of the Microsoft deal, Activision Blizzard remains a strong business and investment for the long term. It owns a lucrative library of video games, including one of the world's most valuable franchises, Call of Duty. The latest installment in that series -- Modern Warfare II -- was released on Nov. 10 and hit $1 billion in sales in just 10 days, bringing the franchise's total to $31 billion since the first Call of Duty debuted in 2003.

Activision has a bright future ahead of it, and the possibility of its acquisition in 2023 -- at an attractive premium to its current share price -- only makes it more tempting to pick up before the end of the year. 

A Buffett stock to avoid: Amazon

Berkshire Hathaway started snapping up Amazon's (AMZN -1.14%) stock in 2019, and it currently accounts for 0.3% of the conglomerate's equity portfolio. That $1 billion worth of stock amounts to a 0.1% stake in the e-commerce giant.

Given that it's the biggest name in e-commerce and also a major player in cloud computing, one might expect Amazon to be a no-brainer buy. However, high inflation and a potential recession in 2023 could bring further declines to its business. 

In the third quarter, Amazon's revenue rose 14.7% year over year to $127.1 billion, missing analysts' consensus forecast by $370 million. Meanwhile, its operating income declined 48% to $2.5 billion. The most significant hit to Amazon's top line came from its e-commerce business, where international sales fell by 5% to $27.2 billion. 

With the possibility of a recession in 2023 looming large, Amazon could spend the next few years working to recover those lost sales. As of Sept. 30, the company's free cash flow stood at negative $26.3 billion, which has grown considerably from the negative $14.7 billion it reported in December 2021. 

Additionally, Amazon Web Services has experienced slowing growth over the past year, reporting a year-over-year revenue gain of 27% to $20.5 billion in Q3 2022. By contrast, this segment grew 33% in Q2 2022 and 39% the year before in Q3 2021. 

As Amazon Web Services made up 100% of Amazon's operating income in Q3 2022, declining growth is concerning. Considering the additional likelihood of declines in its e-commerce business in 2023, I'd hold off on buying this Buffett stock for now.