With a bear market lingering, high inflation persisting, and a recession possibly around the corner, investors are once again looking to Warren Buffett to guide them through a volatile stock market.

It's easy to see why. Buffett has nearly doubled the annual return of the S&P 500 for almost 60 years, as long as he's been running Berkshire Hathaway (BRK.A 0.99%) (BRK.B 0.91%).

While Berkshire's performance this year is only slightly better than the S&P 500's, there are a number of stocks that Buffett's conglomerate owns that look like good bets going into 2023. Here's a pair that look especially ripe for the picking.

Berkshier Hathaway CEO Warren Buffett

Image source: The Motley Fool.

1. Bank of America

Bank of America (BAC 2.06%) is Berkshire's second-biggest holding behind Apple and is by far its biggest bank investment. In recent years, Buffett seems to have doubled down on Bank of America: Berkshire sold its stake in Wells Fargo, which was at one point its biggest holding, due in part to a phony accounts scandal; it also dumped its shares of JPMorgan Chase. In the third quarter, Berkshire significantly cut its stakes in US Bancorp and Bank of New York Mellon.

I don't know why Buffett likes Bank of America so much, but I can venture some educated guesses.

First, the bank has overcome its errors during the financial crisis, and has been well run for a decade under CEO Brian Moynihan. Under Moynihan's steady leadership, the company has reformed its reputation, avoided excessive risks, and steadily grown the bank's deposits and stock price. Along the way, he's earned the respect of Buffett, who first took a stake in Bank of America through a $5 billion Berkshire acquisition of preferred shares in 2011; Buffett seems to like his conservative approach.

Bank of America's recent results also show the company performing well in a volatile environment. Excluding provisions for credit losses, which are a noncash charge, its pre-tax income increased by 10% to $9.2 billion in the third quarter; its loan book also grew by 12% over the last year to $1 trillion. Net interest margin has increased for three quarters in a row, clocking in at 2.08% in the third quarter, showing the company is benefiting from rising rates.

The country's second-biggest bank by assets has been steadily buying back stock, reducing shares outstanding by 6% over the last year, and it pays a dividend currently yielding 2.7%. The stock also looks cheap, trading at a price-to-earnings ratio of just 10.

That valuation could imply that investors are cautious ahead of a recession. But Bank of America's conservative approach makes it well-prepared for a downturn, though Moynihan has said he only expects a mild one. And the bank should be able to benefit from rising interest rates over the next year.

2. Taiwan Semiconductor Manufacturing

While Buffett's company has owned Bank of America for a decade, the other stock to buy now has only recently become a Berkshire holding: Taiwan Semiconductor Manufacturing Co. (TSM 1.60%). Berkshire invested more than $4 billion into the world's biggest semiconductor foundry, and in a number of ways TSMC looks like the classic Buffett stock.

First, TSMC has a near-monopoly in chip fabrication. Most semiconductor companies, like Intel, Advanced Micro Devices, and NVIDIA, don't produce their own chips; they just design them. Instead, they rely on suppliers like TSMC to make them; the recent chip shortage has highlighted how much of a need there is for manufacturing.

That has worked to TSMC's advantage, as the company is both growing fast and highly profitable. In the third quarter, revenue jumped 48% to $20.2 billion, and profits nearly doubled to $9.2 billion, giving it a net profit margin of 46%.

TSMC also enjoys a wide economic moat, Buffett's top criterion for choosing a stock. The company holds 53% market share of the global pure-play foundry market, and 90% of super-advanced computer-chip production. Building a semiconductor fabrication plant is time-consuming and expensive, meaning market-share dynamics are unlikely to shift significantly in the near future.

For example, TSMC is opening a fabrication plant in the U.S. for the first time, building two new fabs in Arizona, and pledging to invest $40 billion -- a scale that few rivals can compete with. That will also significantly expand the company's capacity.

Though those qualities would seem to warrant a premium discount, TSMC trades at a price-to-earnings ratio of just 14.5. At the current price, the semiconductor stock looks like a steal, and it's no surprise Buffett's company is now a shareholder.