3 of the Best Buffett Stocks to Buy for 2023

Warren Buffett's Berkshire Hathaway invests in many solid, blue chip stocks. Its holdings are a great place to look if you're not sure what to invest in. After all, it's hard to go wrong picking stocks from a portfolio that has already been vetted by some of the smartest investors in the world.

There are three stocks in particular that stand out to me from Berkshire's portfolio that have a good mix of growth and value that can make them attractive investments to own next year. They include Taiwan Semiconductor Manufacturing (TSM -4.86%), American Express (AXP -0.08%), and Activision Blizzard (ATVI).

1. Taiwan Semiconductor Manufacturing

Taiwan Semiconductor Manufacturing is a new Berkshire Hathaway holding, which the company disclosed last month. It's possible that Buffett, who normally doesn't invest in fast-growing tech stocks, didn't make the purchase, and another portfolio manager was behind the move.

But the top chipmaker is a solid investment as the global chip shortage should create plenty of demand for Taiwan Semiconductor in the long run. In its most recent quarter, for the period ending Sept. 30, the company's revenue totaled $20.2 billion and rose 36% year over year. For the final quarter of the year, management expects much of the same, projecting the top line to come in between $19.9 billion and $20.7 billion.

Earlier this month, the company announced plans to build a second factory in Arizona; it's now planning to invest $40 billion into U.S.-based manufacturing. The Biden administration has been wary of relying on Asian production for chips, and with the passing of the Chips and Science Act of 2022 in August, Taiwan Semiconductor should benefit from incentives aimed at bringing more chip manufacturing to the U.S. That can lead to greater profits for the company in the long run.

Taiwan Semiconductor's stock is already looking like a great buy right now, trading at 13 times its future earnings (based on analyst estimates).

2. American Express

American Express is one of Berkshire's largest holdings. Berkshire holds all the major credit card companies, but Visa and Mastercard don't make up nearly as much of its portfolio as American Express does. American Express is known for being a premier brand, one that attracts a more affluent type of customer, which can add more safety behind the business. In that sense, it's not unlike tech giant Apple, which is Berkshire's top holding.

Both Amex and Apple have strong brands as well as customers that may be more resilient than your average consumer, and which enjoy greater purchasing power. This year, Amex has also been generating stronger growth than both Visa and Mastercard.

AXP Revenue (Quarterly YoY Growth) data by YCharts

Another reason investors may want to buy shares of Amex instead: Its forward price-to-earnings (P/E) multiple of 16 is far lower than that of Visa (26) and Mastercard (34).

3. Activision Blizzard

Video game company Activision Blizzard may soon be part of tech giant Microsoft, which has agreed to pay $95 per share for the business. That's well above the $77 that Activision was trading at on Monday, and would imply a potential upside of 23%.

Activision is the name behind the popular video game franchise Call of Duty. Microsoft owns the Xbox, and there are concerns that the deal could hurt competition, with the Federal Trade Commission recently announcing it would try to block the acquisition. One of the concerns is that Microsoft will "withhold content from its gaming rivals," according to Holly Vedova, the director of the FTC's Bureau of Competition.

The content in question is the Call of Duty franchise. But Microsoft recently said it would commit to bringing the games to Nintendo under a 10-year agreement, in a sign that it would allow the content to be available on other platforms. Microsoft has also suggested it would be willing to make a similar deal with Sony.

While Microsoft is doing all it can to ensure the deal doesn't fall through, Activision could still make for a good buy even if that does happen. The stock has plummeted so far that Activision's future P/E is at 20, which is not far from the S&P 500 average of 18. 

There's a good margin of safety there to make the stock a good buy regardless of what happens with the acquisition. With some strong games in its portfolio and Activision generating close to 90% of its sales from subscriptions and in-game purchases, which can be a great source of recurring revenue, this is a solid business to invest in for the long haul.

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