It's been a challenging year for investors. Hints of a full-blown recession have been seen in the wild, and while the future of the stock market remains inscrutable, it makes sense that many people are concerned about the potential impact a deeper bear market could have on their finances.
It's impossible to know exactly how markets will perform in the coming months, but one fact is still certain. There will be a bull market somewhere down the line. Every bear market in history has eventually given way to a bull market, and this one will be no exception. Whether the upswing is a couple of years away or just around the corner, the best approach to a weak market is to accumulate shares in great companies at low prices. The time to sell will be much later, after the next macroeconomic sea change.
Here's how the most successful investors on the planet are getting ready. The three stocks below have been popular buys among elite portfolio managers in recent months, according to reports from Dataroma.com.
1. Amazon
Many master investors are scooping up Amazon (AMZN -2.56%) stock these days. The list of active buyers is a virtual who's who of Wall Street winners, including the contrarian genius Bill Miller, the ultra-patient Bill Nygren of Oakmark Funds, and the inscrutable John Armitage from Egerton Capital. Twelve superinvestors either started or increased their Amazon holdings during the third quarter of 2022.
It's not hard to see why these brilliant value investors agree that Amazon is a robust buy today. The e-commerce and cloud computing titan's share price was cut in half over the last 52 weeks. At the same time, Amazon is the unchallenged leader in several of the stock market's hottest growth sectors today, and its long-term sales growth looks like this:
AMZN Revenue (TTM) data by YCharts
It's true that the raging top-line growth is taking a breather at the moment as the global economy heads into the holiday season amid weak consumer spending and high inflation rates. Amazon's competitors face the same brutal headwinds. If anything, the innovative infrastructure that Jeff Bezos' company manages should give Amazon a leg up on smaller rivals in this challenging period. I would not be surprised if Amazon ends up gaining market share in both online retail sales and cloud computing services by the end of this inflation-flavored crisis.
That makes Amazon a no-brainer buy at a temporary fire sale.
2. Paramount Global
The Paramount Global (PARA 13.40%) media conglomerate may have inspired a smaller group of elite investors in recent months, but Paramount's buyers are no less illustrious. Heading a short list of three Wall Street gurus nibbling on this stock in recent months, you'll find Warren Buffett's Berkshire Hathaway (BRK.A 1.18%) (BRK.B 1.30%) placing the largest buy orders.
Buying Paramount stock has become a habit for Buffett and his team. Berkshire has increased its holdings of this stock in three consecutive quarters.
You might wonder why Buffett is into this media creator, which is shifting its focus to the streaming media market. That's not the type of meat-and-potatoes business the Oracle of Omaha prefers, even if the long-term growth prospects in digital media services look fantastic.
However, Paramount is a perfect fit for Buffett's legendary ability to find well-run businesses at a low price. This company was a turnaround prospect five years ago, and the bargain-bin patina of that period still lingers around today's improved business model.
So the company keeps delivering robust top-line growth and solid earnings, but share prices are still down by 41% over the last year. These conflicting trends add up to a jaw-dropping value proposition.
You can pick up Paramount stock at the rock-bottom valuation of 4 times trailing earnings, 0.4 times sales, and 0.5 times Paramount's book value. Furthermore, the effective dividend yield now stands at a generous 5.7%. Valuation ratios and oversize dividend yields like these are normally reserved for companies struggling to keep the lights on, not for profitable and growing businesses that have earned the respect of Warren Buffett.
3. Berkshire Hathaway
Surprise, surprise! Berkshire Hathaway is not just an active buyer of stocks in this inflation-tinted market, but also a frequent target for other master investors.
For example, Fairholme Fund manager Bruce Berkowitz doubled his Berkshire holdings in the third quarter. Five other top-shelf fund managers followed along, taking advantage of a rare lull in Berkshire Hathaway's almost unstoppable stock price gains. The company's unique combination of diverse investment holdings and deep pockets tends to stabilize its stock charts.
But you know who's buying more Berkshire stock than anyone while share prices are low? That would be Warren Buffett.
Berkshire spent $12.1 billion on share buybacks over the last four quarters, easily surpassing the $1.8 billion invested by the most active fund manager in recent months. That's down from more than $30 billion in the four quarters ending in July 2021, but most of that buyback surge took place at the deepest stock price discounts of the early coronavirus pandemic.
So if you really want to mirror Buffett as he buys his favorite stocks on the open market, Berkshire Hathaway would be a fine place to start. This company has a decades-long history of outperforming the market:
Mere mortals like you and I can take advantage of Buffett's market-beating wisdom by trying to follow his lead -- or by investing in the fantastic company he built around a core of cash-generating insurance services. And there's nothing wrong with trying both strategies at the same time, of course.
